Industrial Laws Notes

Section B
[CMA INTER]
Industrial Laws
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CS. Rajeev choudhary [Amit Kumar Classes]
1948
FACTORIES ACT,
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INTRODUCTION
The Factories Act, 1948 enacted to regulate the working conditions in factories.
Ravi Shankar Sharma v. State of Rajasthan, 1993,
Court held that Factories Act is a social legislation and it provides for the health,
safety, welfare and other aspects of the workers in the factories.
Conclusion
The Act provides for protection to the workers from being exploited by the greedy
business establishments and it also provides for the improvement of working conditions
within the factory premises.
Main Objects of Factories Act, 1948

 to ensure adequate safety measures and
 to promote the health and welfare of the workers employed in factories.
 makes provisions regarding employment of women and young persons (including
children and adolescents), annual leave with wages etc.
Applicability
 The Act extends to whole of India including Jammu & Kashmir and
 Covers all manufacturing processes and establishments falling within the definition of
„factory‟ as defined under Section 2(m) of the Act.
 Unless otherwise provided it is also applicable to factories belonging to Central/State
Governments. (Section 116)
The Factories Act, 1948 extend to whole of India and came into
effect from 01.04.1949.
IMPORTANT DEFINITIONS CS. Rajeev choudhary [Amit Kumar Classes]
Competent person [Section 2(ca)]

‘Competent person’ means a person or an institution recognized as such by the Chief Inspector
for the purposes of carrying out tests, examinations and inspections required to be done in a
factory under the provisions of this Act having regard to-
 the qualifications and experience of the person and facilities available at his
disposal; or
 the qualifications and experience of the persons employed in such institution

and facilities available therein,
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it may be noted that with regard to the conduct of such tests,
examinations and inspections, more than one person or institution can be
recognized as a competent person in relation to a factory;
Hazardous Process [Section 2(cb)]

‘Hazardous process’ as any process or activity in relation to an industry specified in the First
Schedule where, unless special care is taken, raw materials used therein or the intermediate or
finished products, bye-products, wastes, or effluents thereof would-
 cause material impairment to the health of the persons engaged in or connected

therewith, or
 result in the pollution of the general environment.
The State Government may, by notification in the Official Gazette,

amend the First Schedule by way of addition, omission or variation of any
industry, specified in the said Schedule;
Manufacturing process [Section 2(k)]

‘Manufacturing process’ as any process for-
• making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning,

breaking up, demolishing, or otherwise treating or adapting any article or substance with a
view to its use, sale, transport, delivery or disposal, or
• pumping oil, water, sewage or any other substance; or
• generating, transforming or transmitting power; or
• composing types for printing, printing by letter press, lithography, photogravure or other
similar process or book binding; or
• constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; or
• preserving or storing any article in cold storage.
In ‘M/s Qazi Noorul Hasan Hamid Hussain Petrol Pump V. Deputy Director,
Employees’ State Insurance Corporation’ – 2003
 it was held that the definition ‘manufacturing process’ does not depend upon and is not
correlated with any end product being manufactured out of a manufacturing process.
 It includes even repair, finishing, oiling or cleaning process with view to its use, sale,
transport, delivery or disposal.
 It cannot be restricted an activity which may result into manufacturing something or

production of a commercially different article.
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Worker [Section 2(l)]
A person employed, directly or by or through any agency (including a contractor) with or without
the knowledge of the principal employer, whether for remuneration or not,
 in any manufacturing process, or

 in cleaning any part of the machinery or premises used for a manufacturing
process, or
 in any other kind of work incidental to, or connected with, the manufacturing
process, or the subject of the manufacturing process
but does not include any member of the armed forces of the Union.
‘Lal Mohammed V. Indian Railway Construction Co. Limited’ –1999 SC

It was held that all the workers employed by a construction company would
squarely attract the definition of the term „workman‟ as found in Section 2(l) of
the Act as they are working for remuneration in a manufacturing process
carried out by the project.
Factory [Section 2(m)]

the term ‘factory’ defines as any premises including the precincts thereof-
whereon ten or more workers are • whereon twenty or more workers are
working, or were working on any day of working, or were working on any day of
the preceding twelve months, and in any the preceding twelve months, and in any
part of which a manufacturing process is part of which a manufacturing process is
being carried on with the aid of power, or being carried on without the aid of CS. Rajeev choudhary [Amit Kumar Classes]
is ordinarily so carried on, or power, or is ordinarily so carried on,
but does not a mine subject to the operation of the Mines Act, 1952 or
include a mobile unit belonging to the armed forces of the Union,
a railway running shed or a hotel, restaurant or eating place.
Points to be remembered
o For computing the number of workers all the workers in different groups and relays in
a day shall be taken into account;
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o The mere fact that an Electronic Data Processing Unit or a Computer Unit is installed
in any premises or part thereof, shall not be construed to make it a factory if no
manufacturing process is being carried on in such premises or part thereof.
The State Government may make rules relating to approval, licencing and
registration of factories and no factory can run without such licence or
approval. Power to delicence and deregister is also with the SG
Occupier [Section 2(n)]

The person who has ultimate control over the affairs of the factory.
• in the case of a • in the case of a • in the case of a factory • in the case of a ship
firm or other company, any owned or controlled by the which is being
association of one of the CG or any SG, or any local repaired, or on which
individuals, any directors shall authority, the person or maintenance work is
one of the be deemed to be persons appointed to being carried out, in
individual partners the occupier; manage the affairs of the a dry dock which is
or members factory by the CG, the SG or available for hire,-
thereof shall be the local authority, as the
deemed to be the case may be, shall be
occupier; deemed to be the occupier;
• the owner of the • the owner of the ship or his agent or master or other office-in-
dock shall be charge of the ship or any person who contracts with such owner,
deemed to be the agent or master or other officer-in-charge to carry out the repair or
occupier for the maintenance work shall be deemed to be the occupier for the
purposes of any purposes of any matter provided for by or under section 13, 14, 16 or
matter provided for 17 (save as otherwise provided in this proviso) or Chapter IV (except
by or under- section 27) or section 43, section 44, or section 45, Chapter VI,
Chapter VII, Chapter VIII or Chapter IX or section 108, section 109 or
section 110, in relation to- CS. Rajeev choudhary [Amit Kumar Classes]
• section 6, 7, 7A, 7B, 11 or 12; • the workers employed directly by him,

• section 17, in so far as it relates to or by or through any agency; and
the providing and maintenance of
sufficient and suitable lighting in or • the machinery, plant or premises in use
around the dock; for the purpose of carrying out such
• section 18, 19, 42, 46, 47 or 49, in repair or maintenance work by such
relation to the workers employed on owner, agent, master or other officer-
such repair or maintenance; in-charge or person.
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In ‘Container Corporation of India Limited v. Lt. Governor, Delhi’ – 2002
It was held that in the case of a company, which owns a factory, it is only
one of the directors of the company who can be notified as the occupier
of the factory for the purpose of the Act and the company cannot
nominate any other employee to be the occupier of the factory.
Notice by occupier [Section – 7]

The occupier shall,
at least 15 days before he begins to occupy or use any premises as a factory, send to the
Chief Inspector, a written notice containing
 the name and situation of the factory,

 the name and address of the occupier,
 the nature of manufacturing process,
 the details of workers etc.,
Whenever a new manager is appointed, the occupier shall send to the Inspector a
written notice and to the Chief Inspector a copy thereof within seven days from the
date on which such person takes over charge.
Duties of occupier [Section 7A]

Every occupier shall ensure, so far as is reasonably practicable, the health, safety and welfare of
all workers while they are at work in the factory.
Inspector [Section 8]
The State Government may appoint such persons as posses the prescribed qualification to
be Inspectors for the purpose of this Act and may assign to them such local limits as it may think
fit.
Section 9 prescribes the powers of the Inspector as

detailed below-
 to enter into any place which is used, or which he has reason to believe is used
as a factory;
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 make examination of the premises, plant, machinery, article or substance;
 inquire into any accident or dangerous occurrence, whether resulting in bodily
injury, disability or not and take on the sport statements of any person which he
may consider necessary for such inquiry;
 require the production of any document relating to factory;
 seize or take copies of any register, record or other documents of any portion
thereof as he may consider necessary;
 to take possession of any article or substance or part thereof and detain it for so
long as is necessary for such examination;
 to exercise such other powers as may be prescribed.
Certified surgeons [Section 10]

The State Government may appoint qualified medical practitioners to be certifying surgeons
for the purposes of this Act within such local limits or for such factory or class or description of
factories as it may assign to them respectively.
The duties of certified surgeons are as follows-

• the examination • the examination of person • the exercising of such medical
and certification of engaged in factories in such supervision as may be prescribed
young persons; dangerous occupations or for any factory or class or
processes as may be prescribed; description of factories, where-
• cases of illness have occurred which it is reasonable to believe are due to the
nature of the manufacturing process carried on, or other conditions of work
prevailing, therein;
• by reason of any change in the manufacturing process carried on or in the

substances used therein or by reason of the adoption of any new
manufacturing process or of any new substance for use in a manufacturing CS. Rajeev choudhary [Amit Kumar Classes]
process, there is a likelihood of injury to the health of workers employed in
that manufacturing process;
• young persons are, or are about to be, employed in any work which is likely
to cause injury to their health.
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Cleanliness [Section 11]
Every factory shall be kept clean and free from effluvia arising from any drain, privy or
other nuisance, and in particular-
• removal of • cleaning of the • providing • to ensure that • all doors, windows

accumulated dirt floor of every effective interior walls and other framework
and refuse on workroom – once drainage for and roofs etc., which are of wooden
floors, benches of in every week by removing are kept clean or metallic shall be
workroom, stair washing with water to the the following is kept painted or
cases and disinfectant or by extent to be complied varnished at least
passages and some other possible; with- once in every period
effective disposal effective method; of five years;
of the same;
• white wash or • where surface has been • where they are painted or
color wash should painted or varnished, repair varnished or where they have
be carried out at or revarnish should be carried smooth impervious surface, it
least once in every out once in every five years, should be cleaned once in e very
period of 14 months; if washable then once in period of 14 months by such
every period of six months; method as may be prescribed.
Overcrowding [Section 16]

 No room in any factory shall be overcrowded to an extent injurious to the health of the
workers employed therein.
 There shall be in every workroom in a factory at least 14.2 cubic meters of space for CS. Rajeev choudhary [Amit Kumar Classes]
every worker employed therein.
Drinking water [Section 18]

 Effective arrangements shall be made to provide and maintain at suitable points conveniently
situated for all workers employed a sufficient supply of wholesome drinking water.
 Where more than 250 workers are employed provision shall be made for cool drinking
water during hot weather.
 The water points shall be away six meters from any washing place, urinal, latrine,
spittoon, open drain carrying sullage or effluent or any other source of contamination.
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Latrines and urinals [Section 19]
Every factory-
• sufficient latrine and urinal accommodation of prescribed types shall be provided

conveniently situated and accessible to workers at all times while they are at factory;
• separate enclosed accommodation shall be provided for male and female workers;
• they shall be adequately lighted and ventilated;
• they shall be maintained in a clear and sanitary conditions at all times;
• sweepers shall be employed to keep clean latrines, urinals and washing places.
If there are more than 250 workers are employed all latrine and urinal
accommodation shall be of prescribed types.
The latrines and urinals shall be washed and cleaned at least once in every
seven days with suitable detergents or disinfectants or with both.
Safety
The factory is to take safety measures in respect of the following-
• Fencing of machinery; • Pits, sumps openings in floors etc.,;

• Work on or near machinery in motion; • Excessive weights;
• Employment of young persons on dangerous • Protection of eyes;
machines; • Precaution against dangerous fumes,
• Striking gear and devices for cutting off power; gases, etc.,
• Self acting machines; • Precautions regarding the use of

• Casing of a new machinery; portable electric light;
• Prohibition of employment of women and • Explosive or inflammable dust, gas etc.,
children near cotton openers; • Precaution in case of fire;
• Lifting machines, chains, ropes and lifting • Safety on buildings and machinery;
tackles; • Maintenance of buildings;
• Revolving machinery; • Appointment of safety officers.
• Floors, stairs and means of access;
Hazardous Processes
 The State Government may, for purposes of advising it to consider applications for
grant of permission for the initial location of a factory involving a hazardous process or
for the expansion of any such factory, appoint a Site Appraisal Committee. 1
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 The Site Appraisal Committee shall examine an application for the establishment of a
factory involving hazardous process and make its recommendation to the State
Government within 90 days of the receipt of such application.
 The Committee has the power to call for any information from the person making an
application.
 When the application is got approved by the State Government, it shall not be
necessary to obtain a further approval from the Central Board of the State Board of
pollution authorities.
Welfare
The following are the welfare measures prescribed in the Act to be provided by the factory
to their workmen-
• washing facilities;
• facilities for storing and drying clothing;
• facilities for sitting;
• first aid appliances;
• canteens;
• shelters, rest rooms and lunch rooms;
• crèches;
• appointment of welfare officers.
First aid appliances [Section 45]

 First aid appliances shall be provided and maintained so as to be readily accessible
during all working hours or cupboards equipped with the prescribed contents and the
number of such boxes or cupboards to be provided and maintained shall not be less
than for every 150 workers at any one time in the factory.

 In a factory where more than 500 workers are employed an ambulance of the prescribed
size containing the prescribed equipment, nursing staff etc., shall be provided and made
readily available at all times.
Canteens [Section 46]

If more than 250 workers are employed in a factory a canteen or canteens shall be provided
and maintained by the occupier for the user of the workers. The items of expenditure in the
running of the canteen which are not to be taken into account in fixing the cost of
foodstuffs shall be borne by the employer
Shelters, rest rooms and lunch rooms [Section 47]

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If more than 150 workers are employed adequate and suitable shelters or rest rooms and a
suitable lunch room with provision for drinking water shall be provided and maintained for
the use of the workers. The same shall be sufficiently lighted and ventilated and shall be
maintained in a cool and clean condition.
Crèches [Section 48]

If more than 30 women workers are employed there shall be provided and maintained a
suitable room for the use of children under the age of 6 years of such women. The same
shall be adequately ventilated and shall be maintained in clear and sanitary conditions and
under the charge of women trained in the care of children and infants.
Welfare Officers [Section 49]

If 500 or more than workers are employed in a factory, the occupier shall employ in the
factory such number of welfare officers as may be prescribed.
WORKING HOURS OF ADULTS

Working hours
Section 54 Section 55 Section 56 Section 51
no adult worker the periods of work of adult the periods of work of no adult worker
shall be workers in a factory each an adult worker in a shall be
required or day shall be so fixed that no factory shall be so required or
allowed to work period shall exceed five arranged that allowed to work
in factory for hours and that the worker inclusive of his in a factory for
more than nine shall work for more than five intervals for rest, they more than 48
hours in any hours before he has had an shall not spread over hours in any
day. interval for rest of at least half more than ten and week.

an hour. half hours in any day.
Weekly holidays
Section 52 provides that no adult worker shall be required or allowed to work in a factory on
the first day of the week unless-
• he has or will have a holiday for a whole • the manager of the factory, has, before
day on one of the three days immediately the said day or the substituted day
before or after the said day; and whichever is earlier-
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• delivered a notice at the office of the Inspector of his • displayed a notice to that
intention to require the worker to work on the said day and effect in the factory.
of the day which is to be substituted; and
Compensatory holidays [Section 53]

If a worker is deprived of any of the weekly holidays he shall be allowed within the month in
which the holidays were due to him or within two months immediately following that
month, compensatory holidays of equal number to the holidays so lost shall be given.
Shift duty
Where a worker in a factory works on a shift which extends beyond midnight-
• for the purposes of Section 52 and 53, • the following day for him shall be deemed to
a holiday for a whole day shall mean in be the period of 24 hours beginning when such
his case a period of 24 consecutive shift ends, and the hours he has worked after
hours beginning when his shift ends; midnight shall be counted in the previous day.
The work shall not be carried on in any factory by means of a system of shifts
so arranged that more than one relay of workers is engaged in work of the
same kind at the same time.
Overtime
Where a worker works in a factory for more than 9 hours in any day or for more than 48
hours in any week, he shall, in respect of the overtime work, be entitled to wages at the rate

of twice his ordinary rate of wages.
The term „ordinary rate of wages‟ is defined as
 the basic wages plus such allowances,

 including the cash equivalent of the advantage accruing through the concessional sale to
workers of food grains and other articles, as the worker is for the time being entitled to,
but does not include a bonus and wages for overtime work.
Double employment
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No adult worker shall be required or allowed to work in any factory on any day on which he
has already been working in any other factory, save in such circumstances as may be
prescribed.
Register of adult workers

Section 62 provides that a register of adult workers shall be maintained, showing
• the name of each adult worker in the factory;

• the nature of the work;
• the group, if any, in which he is included;
• where his group works on shifts, the relay to which he is allotted;
• such other particulars as may be prescribed.
Employment of women
o no woman shall be required or allowed to work in any factory except between
the hours of 6 A.M. and 7 P.M.;
o the State Government may authorize the employment of any women between
the hours of 10 PM and 5 A.M.;
o there shall be no change of shifts except after a weekly holiday or any other
holiday.
Employment of young persons

Prohibition of employment of young children
No child who has not completed his 14th year shall be required or allowed to work in any
factory.
Adolescent worker
A child who has completed his 14th year or an adolescent shall not be allowed to work in
any factory unless-
• a certificate of fitness granted is in the custody of the manager of the factory;

and
• such child or adolescent carries while he is at work a token giving a reference to
such certificate.
Certificate of fitness
A certifying surgeon shall, on the application of any young person or his parent or guardian
accompanied by a document signed by the Manager of a factory that such person will be
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employed therein if certified to be fit for work in a factory, or on the application of the Manager of
the factory in which any young person wishes to work, examine such person and ascertain his
fitness for work in a factory.
The certifying surgeon, after examination, may grant to such young

person, in the prescribed form or may renew-
o a certificate of fitness to work in a factory as a child, if he is satisfied that the young

person has completed his 14th year, that he has attained the prescribed physical
standards and that he is fit for such work;
o a certificate of fitness to work in a factory as an adult, if he is satisfied that the young

person has completed his 15th year and is fit for a full day’s work in a factory.
The certificate granted by the certifying surgeon shall be valid for a period 12
months from the date thereof. He shall revoke any certificate granted or renewed if
in his opinion the holder of it is no longer fit to work in capacity stated therein in a
factory.
Working hours for children [Section 71]

 No child shall be employed or permitted to work in any factory for more than
four and a half hours in any day and during night.
 The period of work of all children employed in a factory shall be limited to two
shifts which shall not overlap or spread over more than five hours each.
 Each child shall be employed in only one of the relays which shall not, except
with the previous permission.
 No female child shall be allowed to work in any factory except between 8 A.M.

and 7 P.M.,
Annual Leave with wages

Annual leave
Every worker who has worked for a period 240 days or more in a factory during a
calendar year shall be allowed leave with wages for a number days calculated at the
rate of-
 if an adult, one day for every 20 days of work performed by him during the
previous calendar year;
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 if a child, one day for every 15 days of work performed by him during the
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previous calendar year.
The following shall be deemed to be days on which the worker has worked
for the purpose of computation of the period of 240 days or more-
• any days of lay off, by • in the case of a female • the leave earned in the
agreement or contract or worker, maternity leave for year prior to that in which
as permissible under the any number of days not the leave is enjoyed
standing orders; exceeding 12 weeks; and
In calculating the leave fraction of leave of half a day or more shall be treated as
one full day’s leave and fraction of less than half a day shall be omitted.
Carry forward of leave

 If a worker does not in any calendar year take the whole of the lave allowed to him
any leave not taken by him shallbe carried over to the succeeding year.
 The total number of leave that may be carried forward shall not exceed 30 days in the
case of an adult or 40 in the case of a child.
 A worker, who has applied for leave with wages but has not been granted, shall be
entitled to carry forward the leave refused without any limit.
Availing of leave

 A worker may, at any time, apply in writing to the Manager not less than 15 days
before the date on which he wishes his leave to begin, to take all the leave or any
portion thereof allowable to him during the calendar year.
 Such application shall be made not less than 30 days before the date on which he
wishes his leave to begin, if he is employed in a public utility service.
 An application for leave shall not be refused unless refusal is in accordance with the
scheme for the time being in operation.
Wages during leave period
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A worker shall be entitled to wages at a rate equal to the daily average of his total full time
earnings for the days on which he actually worked during the month immediately preceding his
leave,
 exclusive of any over time and bonus

 but inclusive of dearness allowance and the cash equivalent of the advantage
accruing through the concessional sale to the worker of food grains and other
articles.
In case of a worker who has not worked on any day during the calendar month immediately
preceding his leave, he shall be paid at a rate equal to the daily average of the total full time
earnings for the days on which he actually worked during the last calendar month preceding
his leave, in which he actually worked.
Advance payment
A worker who has been allowed leave for not less than four days, in case of an adult, and
five days, in the case of a child, shall, before his leave begins be paid the wages due for
the period of the leave allowed.
Encashment of leave
If a worker is discharged or dismissed from services or quits his employment or is
superannuated or dies while in service, during the course of the calendar year, he or his heir
or nominee,
 shall be entitled to the wages in lieu of the quantum of leave to which he was
entitled immediately before such termination of his services.
 Such payment shall be made before the expiry of the second working day from the
date of discharge, dismissal or quitting and

 where the worker is superannuated or dies while in service, before the expiry of two

months from the date of such superannuation or death.
Penalties
If there is any contravention of any of the provisions of this Act or of any rules made there under
or of any order in writing given,
 the occupier and manager of the factory shall each be guilty of an offence and
 punishable with imprisonment for a term which may extend to 2 years or
 with fine which may extend to `1 lakh or with both.
 If the contravention is continued after conviction, with a further fine which may
extend to `1000/- for each day on which the contravention so continued.
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If the contravention resulted in an accident causing death or serious bodily
injury, the fine shall not be less than `25,000/- in the case of an accident
causing death, and `5000/- in the case of accident causing serious bodily
injury
Penalty for obstructing Inspector

Whoever-
• willfully obstructs an Inspector in exercise of any power conferred on him; or

• fails to produce on demand any registers or other documents in his custody before
the Inspector or conceals or prevents any worker in a factory from appearing before;
or
• being examined by, an Inspector
shall be punishable with imprisonment for a term which may extend to six months or
with fine which may extend to `10,000/- or with both.
Penalty for contravention of the provisions relating to hazardous process

Section 96A provides that whoever fails to comply with or contraventions any of the provisions of
Section 41B, 41C or 41H or the rules made there under, shall, in respect of such failure or
contravention,
 be punishable with imprisonment for a term which may extend to seven years
and with fine which may extend to `2 lakhs and
 in case of the failure or contravention continues, with additional fine which

may extend to `5000/- for every day during which such failure or contravention
continues after the conviction for the first such failure or contravention.
If the failure or contravention continues beyond a period of one year after the date
of conviction, the offender shall be punishable with imprisonment for a term which
may extend to ten years.
Offences by workers
If any worker employed in a factory contravenes any provision of this Act or any rules or
by order made there under, imposing any duty or liability on workers, he shall be
punishable with fine which may extend to ` 500/-
Penalty for using false certificate of fitness
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Whoever knowingly uses or attempts to use, as a certificate of fitness granted to himself a
certificate granted to another person or who, having procured such a certificate, knowingly
allows it to be used, or an attempt to use it to be made, by another person,
 shall be punishable with imprisonment for a term which may extend to 2 months or
with fine which may extend to `1,000/- or with both.
Penalty for permitting double employment of child

If a child works in a factory on any day on which he has already been working in another
factory, the parent or guardian of the child or the person having custody of or control over
him or obtaining any director benefit from his wages,
 shall be punishable with fine which may extend to `1000/- unless it appears to the
Court that the child so worked without the consent or connivance of the parent,
guardian or person.
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1972
PAYMENT OF
GRATUITY ACT,
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Introduction
 The term ‘gratuity’ is derived from the Latin word ‘gratuitous’.
 ‘Gratuity’ is the payment made by the employer to the employee at the time
of termination of his service
 either by retirement on superannuation or

 on resignation or
 on termination of the service.
 This is the old age retiral social security benefit.
 A lump sum is payable in consideration of the past services rendered by the

employee.
 The payment of gratuity will be a relief to the retired employee or to the

family members of the employee who dies during his service.
‘Burhanpur Tapti Mills Limited V. Burhanpur Tapti Mills Mazdoor Sangh’

– 1964 SC
It was held that it is a gratuitous payment extended to an employee on

retirement or discharge, in addition to the retrial benefits payable to the
employee.
Object
An Act to provide for a scheme for the payment of gratuity to employees engaged
 in factories, mines, oilfields, plantations, ports, railway companies, shops or other CS. Rajeev choudhary [Amit Kumar Classes]
establishments and for matters connected therewith or incidental thereto,
 employing 10 or more persons (with aid of power) and 20 (without aid of power).
Effect
The Act came into effect from 16th September, 1972.
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Important Definitions:
Appropriate Government
Section 2(a) defines the term ‘appropriate Government’ as-
in relation to an establishment- - the Central

Government,
• belonging to, or under the control of, the Central Government,
• having branches in more than one State,
• of a factory belonging to, or under the control of, the Central
Government,
• of a major port, mine, oilfield or railway company
In any other case - - the State

Government
Employee [Section 2(e)]
Any person, other than an apprentice,
 who is employed for wages, whether the terms of such employment are express or
implied,
 in any kind of work, manual or otherwise,
 in or in connection with the work of a factory, mine, oilfield, plantation, port, railway
company, shop or other establishment to which this Act applies,
but does not include any such person who holds a post under the Central Government or
a State Government and is governed by any other Act or by any rules providing for
payment of gratuity.
‘Ahmedabad Private Primary Teachers Association V. Administrative

Officer’ –2004 SC CS. Rajeev choudhary [Amit Kumar Classes]
It was held that teacher was held to be not an employee under the Act. The teachers are
clearly not intended to be covered by the definition of employee.
But the Payment of Gratuity (Amendment) Act, 2009 has amended the definition of
‘employee, including teachers in educational institutions within the purview of the Act.
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2
Employer [Section 2(f)]
The term ‘employer’, in relation to any establishment, factory, mine, oilfield, port, Railway Company
or shop-
• belonging to, or under the • belonging to, or • in any other case,

control of, the Central under the control of,
Government or a State any local authority, the person, who, or the
Government, authority which, has the
the person appointed ultimate control over the affairs
a person or authority appointed by such authority for of the establishment, factory,
by appropriate Government for supervision and mine, oil field, plantation, port,
the supervision or control of control of employees railway company or shop, and
employees, or or
where the said affairs are
where no person or authority where no person has entrusted to any other person,
has been so appointed, the head been so appointed, the whether called a manager,
of the Ministry or the Chief Executive Officer managing director or by any
Department concerned; of the local authority; other name, such person.
Family [Section 2(h)]
defines the term ‘family’ in relation to an employee, shall be deemed to consist of-
(i) in case of a male employee, himself, (ii) in the case of a female employee, herself, her
his wife, his children, whether married or husband, her children, whether married or
unmarried, his dependent parents and unmarried, her dependent parents and the
the dependent parents of his wife and dependent parents of her husband and the
the widow and children of his widow and children of her predeceased son, if
predeceased son, if any; any.
 Where the personal law of an employee permits the adoption by him of a child, any CS. Rajeev choudhary [Amit Kumar Classes]
lawfully adopted by him shall be deemed to be included in his family, and where a child
of an employee has been adopted by another person and such adoption is, under the
personal law of the person making such adoption lawful such child shall be deemed to
be excluded from the family of the employees.
 A notice shall be in Form D and sent in triplicate by the employee to the employer, who
shall, after recording its receipt on one copy thereof, return the copy to the employee
and send the second copy to the controlling authority of the area.
 an employee may withdraw the notice referred to in sub-rule (1) by giving another
notice in triplicate in Form ‘E’ to the employer,
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Retirement [Section 2(q)]
Termination of the service of an employee otherwise than on superannuation.
Superannuation [Section 2(r)]
The term ‘superannuation’ as in relation to an employee, the attainment by the employee of

such age as is fixed in the contract or conditions of service as the age on the attainment of
which the employee shall vacate the employment.
Wages [Section 2(s)]

All emoluments which are earned by an employee while on duty or on leave in accordance
with the terms and conditions of his employment and which are paid or payable to him in
cash and
 includes dearness allowance

 but does not include any bonus, commission, HRA, over time wages and any other
allowance.
Continuous service Section 2A deals with

the continuous service.
1. an employee shall be said to be in ‘continuous service’ for a period if he has, for that
period been in un-interrupted service, including service which may be interrupted on
account of sickness, accident leave, absence from duty without leave (not being absence in
respect of which an order treating the absence as break in service has been passed in
accordance with the standing orders, rules or regulations governing the employees of the
establishment), lay off, strike or a lock out or cessation of work not due to any fault of the

employee.
2. where an employee (not being an employee employed in a seasonal establishment) is

not in continuous service within the meaning of clause (1) for any period of one year or six
month, he shall be deemed to be in continuous service under the employer:
(a) for the said period of one year, if the (b) for the period of 6 months, if the
employee during the period of 12 calendar employee during the period of 6 calendar
months preceding the date with reference to months preceding the date with reference to
which calculation is to be made, has actually which the calculation is to be made, has
worked under the employer for not less actually worked under the employer for not
than- less than-
(i) 190 days in the case of an (ii) 240 days (i) 95 days, in the case of an (ii) 120 days
employee employed below in any other employee below the ground in any other 2
the ground in mine or in an case; in a mine or in an case.
4
establishment which works establishment which works
for less than 6 days a week; for less than 6 days in a
and week; and
The number o he has been laid off under an agreement or as permitted by the standing
of days on orders made under the Industrial Establishment (Standing Orders) Act,
which the 1946, or under the Industrial Disputes Act, 1947, or under any other law
employee applicable to the establishment;
has actually
worked
o he has been on leave with full wages, earned in the previous year;
under an
employer
shall include o he has been absent due to temporary disablement caused by accident
the days on arising out of and in the course of his employment; and
which-
o in the case of a female, she has been on maternity leave, so however,
that the total period of such maternity leave does not exceed 26 weeks.
3. Where an employee, employed in a seasonal establishment, is not in continuous service

within the meaning of clause (1) for any period of one year or six months, he shall be
deemed to be in continuous service under the employer for such period if he has actually
worked for not less than 75%, of the number of days on which the establishment was in
operation during such period.
Disablement
Disablement means such disablement as incapacitates an employee for the work which he
was capable of performing before the accident or disease resulting in such disablement.
Notice of openings, change and closure of the establishment

 Rule 3 provides that within thirty days of the rules becoming applicable to an
establishment, a notice in Form A shall be submitted by the employer to the Controlling

Authority of the area.
 A notice in Form B shall be submitted by the employer to the controlling authority of

the area within thirty days of any change in the name, address, employer or nature of
business.
 Where an employer intends to close down the business he shall submit a notice in Form
C to the controlling authority of the area at least sixty days before the intended closure.
Display of notice
Rule 4 provides that the employer shall display conspicuously a notice at or near the main
entrance of the establishment in bold letters in English and in a language understood by 2
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the majority of the employees specifying the name of officer with designation authorized
by the employer to receive on his behalf notices under the Act or the rules.
Payment of Gratuity [Section 4]

Gratuity shall be payable to an employee on the termination of his employment after he has
rendered continuous service for not less than five years,-
• on his superannuation, or
• on his retirement; or
• resignation, or
• on his death or disablement due to accident or disease;
The completion of continuous service of five years shall not be necessary where the
termination of the employment of any employee is due to death or disablement. In the case of
death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination
has been made, to the heirs.
 For every completed year of service or part thereof in excess of six months, the
employer shall pay gratuity to an employee at the rate of fifteen days’ wages
based on the rate of wages last drawn by the employee concerned.
 In the case of piece-rated employee, daily wages shall be computed on the

average of the total wages received by him for a period of three months
immediately preceding the termination of his employment, and, for this
purpose, the wages paid for any overtime work shall not be taken into account.
 In the case of an employee employed in a seasonal establishment, the

employer shall pay the gratuity at the rate of seven days’ wages for each
season.
 That the amount of gratuity payable to an employee shall not exceed twenty
months’ wages. The maximum gratuity payable is ` 20 lakhs.
 For the purpose of computing the gratuity payable to an employee who is

employed, after his disablement, on reduced wages, his wages for the period
preceding his disablement shall be taken to be the wages received by him
during that period, and his wages for the period subsequent to his disablement
shall be taken to be the wages as so reduced.
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Forfeiture of Gratuity
• the gratuity of an employee, whose services have been terminated • the gratuity payable
for any act, willful omission or negligence causing any damage or to an employee may
loss to, or destruction of, property belonging to the employer, shall be wholly or partially
be forfeited to the extent of the damage or loss so caused; forfeited,-
• if the services of such employee have • if the services of such employee have
been terminated for his riotous or disorderly been terminated for any act which
conduct or any other act of violence on his constitutes an offence involving moral
part, or turpitude, provided that such offence is
committed by him in the course of his
employment.
The right of receiving the gratuity by the employee is the statutory right. Once
it is eligible to receive the gratuity the employee is entitled to receive the
same unless otherwise restricted by the provisions of law.
Amount of gratuity payable

Gratuity is calculated on the basis of the continuous service rendered by the employee, for
every completed year of service or part in excess of six months at the rate of fifteen days
wages last drawn. The maximum amount of gratuity allowed under the Act is `20 lakhs with
effect from 29.03.2018.

Formula for calculation of gratuity = Last wage drawn x 15/26 x
completed years of service
In calculation of gratuity one month is taken as 26 days.
Nomination [Section 6]
Section 6 provides for filing nomination for receiving the gratuity after the death of the
employee. The following are the points to be noted in respect of nomination-
o Each employee, who has completed one year of service, shall make nomination in Form – F;
o He may distribute the amount of gratuity payable to him under this Act amongst more than
one nominee; 2
7
• If an employee has a family at the time • If at the time of making a nomination the
of making a nomination, the nomination employee has no family, the nomination may be
shall be made in favor of one or more made in favor of any person or persons but if
members of his family, and any the employee subsequently acquires a family,
nomination made by such employee in such nomination shall forthwith become invalid
favor of a person who is not a member of and the employee shall make, within such time
his family shall be void.; as may be prescribed, a fresh nomination in
favor of one or more members of his family;
Dispute [Section 7]
If there is a dispute as to the amount of gratuity payable to the employee, the employer
shall deposit the gratuity with the Controlling Authority. The controlling authority shall,
after due inquiry and after giving the parties to the dispute a reasonable opportunity of
being heard, determine the amount of gratuity payable to an employee. If as a result of such
inquiry any amount in excess of the amount deposited by the employer is found to be
payable, the controlling authority shall direct the employer to pay such amount as is in
excess of the amount deposited by him.
Then the Controlling Authority shall pay the amount of the deposit-
o to the applicant where he is the employee; or
o where the applicant is not the employee, to the nominee or heir of the employee if
the controlling authority is satisfied that there is no dispute as to the right of the
applicant to receive the amount of gratuity.
Application for gratuity [Rule – 7]

An employee who is eligible for payment of A nominee of an A legal heir of an
gratuity under the Act, or any person employee who is employee who is

authorized, in writing, to act on his behalf, eligible for payment eligible for
shall apply, ordinarily within thirty days from of gratuity shall payment of gratuity
the date the gratuity became payable, in Form apply, ordinarily shall apply,
‘I’ to the employer. within thirty days ordinarily within
from the date of one year from the
Where the date of superannuation or gratuity became date of gratuity
retirement of an employee is known, the payable to him, in became payable to
employee may apply to the employer before Form ‘J’ to the him, in Form ‘K’ to
thirty days of the date of superannuation or employer. the employer.
retirement.
An application under this rule shall be presented to the employer either by personal service
or by registered post acknowledgement due. 2
8
An application for payment of gratuity filed after the expiry of the periods specified shall
also be entertained by the employer, if the applicant adduces sufficient cause for the delay
in preferring his claim, and no claim for gratuity under the Act shall be invalid merely
because the claimant failed to present his application within the specified period.
Notice for payment of gratuity

(1) Within fifteen days of the receipt of an application under rule 7 for payment of gratuity,
the employer shall-
(i) if the claim is found admissible on (ii) if the claim for gratuity is not found
verification, issue a notice in Form ‘L’ to the admissible, issue a notice in Form ‘M’ to the
applicant employee, nominee or legal heir, as applicant employee, nominee or legal heir, as
the case may be, specifying the amount of the case may be, specifying the reasons why
gratuity payable and fixing a date, not being the claim for gratuity is not considered
later than the thirtieth day after the date of admissible. In either case a copy of the notice
receipt of the application, for payment shall be endorsed to the controlling
thereof, or authority.
(2) In case payment of gratuity is due to be made in the employer‟s office, the date fixed for
the purpose in the notice in Form „L‟ shall be re fixed by the employer, if a written
application in this behalf is made by the payee explaining why it is not possible for him to
be present in person on the date specified.
(3) If the claimant for gratuity is a nominee or a legal heir, the employer may ask for such
witness or evidence as may be deemed relevant for establishing his identity or
maintainability of his claim, as the case may be. In that „case, the time limit specified for
issuance of shall be operative with effect from the date such witness or evidence, as the case
may be, called for by the employer is furnished to the employer.
(4) A notice in Form „L‟ or Form „M‟ shall be served on the applicant either by personal

service after taking receipt or by registered post with acknowledgement due.
(5) A notice shall in Form „L
Powers of the Controlling Authority

For the purpose of conducting an inquiry the controlling authority shall have the same
powers as are vested in a court, while trying a suit, under the Code of Civil Procedure, 1908,
in respect of the following matters, namely :-
• enforcing the attendance of any person or examining him on oath;

• requiring the discovery and production of documents; 2
• receiving evidence on affidavits;
9
• issuing commission for the examination of witnesses.
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0
Appeal
 Any person aggrieved by an order may, within sixty days from the date of the receipt of
the order, prefer an appeal to the appropriate Government or such other authority as
may be specified by the appropriate Government in this behalf.
 The appropriate Government or the appellate authority, as the case may be, may, if it is
satisfied that the appellant was prevented by sufficient cause from preferring the appeal
within the said period of sixty days, extend the said period by a further period of sixty
days.
 The appropriate Government or the appellate authority, as the case may be, may, after
giving the parties to the appeal a reasonable opportunity of being heard, confirm,
modify or reverse the decision of the controlling authority.
Recovery of gratuity [Section 8]

If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed
time, to the person entitled thereto,
 the controlling authority shall, on an application made to it in this behalf by the

aggrieved person, issue a certificate for that amount to the Collector,
 who shall recover the same, together with compound interest thereon at the rate of
nine per cent per annum, from the date of expiry of the prescribed time, as arrears of
land revenue and pay the same to the person entitled thereto.
Penalties [Section 9]
Whoever, for the purpose of avoiding any payment An employer who contravenes, or

to be made by himself under this Act or enabling makes default in complying with, any
any other person to avoid such payment, of the provisions of this Act or any
knowingly makes or causes to be made any false rule or order made there under shall
statement or false representation shall be be punishable with imprisonment for a
punishable with imprisonment for a term which term which may extend to one year, or
may extend to six months, or with fine which may with fine which may extend to one
extend to one thousand rupees, or with both. thousand rupees, or with both.
Where the offence relates to non-payment of any gratuity payable under this Act, the
employer shall be punishable with imprisonment for a term which shall not be less than
three months unless the court trying the offence, for reasons to be recorded by it in writing is
of opinion that a lesser term of imprisonment or the imprisonment of a fine would meet the
ends of justice.
3
1
EMPLOYEES
PROVIDEND FUND
AND
MISCELLANEOUS
PROVISIONS ACT, CS. Rajeev choudhary [Amit Kumar Classes]
1952
3
2
Introduction
 The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is a
social welfare legislation to provide for the institution of Provident Fund, Pension
Fund and Deposit Linked Insurance Fund for employees working in factories and
other establishments.
 The Act aims at providing social security and timely monetary assistance to
industrial employees and their families when they are in distress.
The following three schemes have been framed under the Act by the Central
Government:
(a) The Employees’ Provident Fund Schemes, 1952;

(b) The Employees’ Pension Scheme, 1995; and
(c) The Employees’ Deposit-Linked Insurance Scheme; 1976.
 The three schemes mentioned above confer significant social security benefits on
workers and their dependents.
 The Act is now applicable to employees drawing pay not exceeding `15,000/- per
month.
 The Act extends to whole of India.
 The term pay includes basic wages with dearness allowance, retaining allowance
(if any), and cash value of food concession.
APPLICABILITY
Subject to Section 16, this Act applies-
• To every • To any other • The Central Government may apply CS. Rajeev choudhary [Amit Kumar Classes]
establishment which establishment employing the provisions of this Act to any
is a factory engaged 20 or more persons or class establishment employing such number
in any industry of such establishments of persons less than 20 as may be
specified in Schedule which the Central specified in the notification. Not less
I and in which 20 or Government may, by than 2 months’ notice is to be given by
more persons are notification in the Official the Central Government to such
employed; and Gazette, specify in this establishments;
behalf.
• Where it appears to the Central Provident Fund Commissioner, that the employer
and the majority of the employees have agreed that the provisions of this Act
should be made applicable to their establishment, he may, by notification, apply
3
3
the provisions of this Act to that establishment on and from the date of such
agreement or from any subsequent date specified in such agreement;
• Once the Act is covered to any establishment it shall continue to apply

notwithstanding the number of the persons employed therein shall at any time
falls below 20.
Non applicability of the Act

Section 16(1) of the Act provides that this Act is not applicable to the following-
• To any establishment • To any other establishment • To any other

registered under the Co- belong to or under the control of establishment set up under
operative Societies Act, the Central Government or a State the Central, Provincial or
1912 or under any other Government and whose employees State Act and whose
law for time being in force are entitled to the benefit of employees are entitled to
in any State relating to co- contributory provident fund or old the benefits of contributory
operative Societies, age pension in accordance with provident fund or old age
employing less than 50 any scheme or rule framed by the pension in accordance with
persons and working Central Government or the State any scheme or rule framed
without the aid of the Government governing such under that Act governing
power; or benefits; or such benefits.
IMPORTANT DEFINITIONS
Appropriate Government [Section 2(a)]
In relation to an establishment belonging to, or under the control of, the the appropriate

Central Government or in relation to an establishment connected with- Government is
the ‘Central
• a railway company; Government’;
• a major port;
• a mine or an oil field; or
• a controlled industry; or
• in relation to an establishment having departments or branches in
more than one State,
In relation to any other establishment, the appropriate

Government is
the ‘State
Government’. 3
4
Authorized Officer [Section 2(aa)]
The term ‘authorized officer’ as-
• the Central Provident Fund Commissioner;

• Additional Central Provident Fund Commissioner;
• Deputy Provident Fund Commissioner;
• Regional Provident Fund Commissioner; or
such other officer as may be authorized by the Central Government, by Notification in the
Official Gazette.
Basic wages [Section 2(b)]

All emoluments which are earned by an employee while on duty or on leave or on holidays
with wages in either case, which are paid or payable in cash to him,
but does not include-
• the cash value of any consideration;

• any dearness allowance house rent allowance, over time allowance, bonus, commission
or any other similar allowance payable to the employee;
• any presents made by the employer.
Contribution [Section 2(c)]

A contribution payable in respect of a member under a scheme or the contribution payable
in respect of an employee to whom the Insurance scheme applies.

Employer [Section 2(e)]
• in relation to an establishment which is a • in relation to any other establishment, the
factory, the owner or occupier of the factory, person who, or the authority which, has the
including the agent of such owner or ultimate control over the affairs of the
occupier, the legal representative of a establishment, and where the said affairs are
deceased owner or occupier and, where a entrusted to a manager, managing director
person has been named as a manager of the or managing agent, such manager,
factory, the person so named; and managing director or managing agent.
Employee [Section 2(f)]

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5
any person who is employed for wages in any kind of work, manual or otherwise, in or in
connection with the work of an establishment, and who gets, his wages directly or indirectly
from the employer, and
includes any person-
• employed by or through a contractor in or in connection with the work of the

establishment;
• engaged as an apprentice, not being an apprentice engaged under the Apprentices Act,
1961 or under the Standing orders of the establishment.
Factory [Section 2(g)]

Any premises, including the precincts thereof, in any part of which a manufacturing process
is being carried on or is ordinarily so carried on, whether with the aid of power or without
the aid or power.
Occupier of a factory [Section 2(k)]

The person who has ultimate control over the affairs of a factory, and, where the said affairs are
entrusted to a managing agent, such agent shall be deemed to be the occupier of the factory.
„Srikanta Dutta Narasimharava Wodiyar V. Enforcement Officer,

Mysore‟- 1993
It was held that the person who is in charge or responsible for the
management or ultimate control over the affairs of the factory or
establishment, in the event of entrustment to a managing agent, such
managing agent shall also be deemed to be the occupier of the factory.
Employees’ Provident Fund Schemes [Section 5]

 The Central Government framed a scheme called the Employees’ Provident Fund
Scheme (‘Scheme’ for short) for the establishment of provident funds for employees.
 The Central Government framed ‘The Employees’ Provident Fund Scheme, 1952 which
came into effect from 2nd September, 1952.
 The fund shall vest in and be administered by the Central Board constituted under
Section 5A of the Act.
 The scheme framed may provide for all or any of the matters specified in Schedule II.
 The scheme may provide that any of the provisions shall take effect either
prospectively or retrospectively on such date as may be specified in the scheme. 3
6
Central Board [Section 5A &5AA]
 Section 5A provides for the establishment of Central Board by the Central Government.
 The Board consists of a Chairman and a Vice Chairman to be appointed by the Central
Government. The Central Provident Fund Commissioner is ex officio. Members to this
Board are being appointed by the Central Government as per the provisions contained in
Section 5A.
 Section 5AA provides for the appointment an Executive Committee by the Central
Government to assist the Central Board in the performance of its functions. The
members of the Executive Committee are appointed by the Central Government.
State Board [Section 5B]

It gives powers to the Central Government, in consultation with the Government of any
State, constitutes for that State, a Board of Trustees to exercise such powers and perform
such duties as the Central Government may assign to it from time to time.
Contributions [Section 6]
As per Section 6, the contribution Employees, if they desire, The Government has
which shall be paid by the may make contribution raised the rate of
employer to the Fund shall be 10%, exceeding the prescribed Provident Fund
of the basic wages, dearness rate but subject to the Contribution from the
allowance and retaining allowance, condition that employer current 8.33% to 10% in
if any, for the time being payable shall not be under any general and in cases of
to each of the employees whether obligation to contribute establishments specially
employed by him directly or over and above the notified by the
through a contractor and the contribution payable as Government, from 10%
employees contribution shall be prescribed by the to 12% with effect from
equal to the contribution payable Government from time to September 22, 1997.

by the employer. time under the Act.
 Each contribution shall be calculated to the nearest rupee, fifty paise or more to
be counted as the next higher rupee and fraction of a rupee less than fifty paise
to be ignored.
 Dearness allowance shall include the cash value of any food concession allowed
to an employee. Retaining allowance is the allowance payable to an employee
for retaining his services, when the establishment is not working.
 The Provident Fund Scheme has made the payment of contribution mandatory
and the Act provides for no exception under which a specified employer can
avoid his mandatory liability
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7
Applicability of the scheme
This scheme shall apply to all factories and other establishments to which the Act applies.
This scheme shall not applicable to the tea factories in the State of Assam.
Withdrawal from the fund
Withdrawal from the fund is allowed for the following purposes-
• For the purchase of a dwelling house/flat or for the construction of a dwelling house
including the acquisition of a suitable site for this purpose;
• For repayment of loans in special cases;
• Withdrawal within one year before the retirement;
• Withdrawal upto 75% of the balance, if not employed from one month or more,
subject to approval of P.F. Commissioner or any officer authorised by him.
Such withdrawals are not required to be repaid.
Advances from the fund
Advances from the fund are paid for the following purposes-
• For illness in certain cases;

• For marriages or post matriculation education of children;
• In abnormal conditions such as calamity of exceptional nature such as flood,

earthquakes or riots – (non-refundable)
• Granted to members affected by cut in the supply of electricity; (non-refundable)
• Grant of advance to members who are physically handicapped; (non-refundable)
Employees’ Pension Scheme- Section 6A

The Central Government framed Employees’ Pension Scheme for the purpose of providing for-
• Superannuation pension;
• Retiring pension or permanent total disablement pension to the employees of any
establishment or class of establishments to which this Act applies; and
• Widow or widower‟s pension;
• Children pension or orphan pension payable to the beneficiaries of such employees.
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8
The Pension Scheme may provide for all or any of its provisions shall take effect
either prospectively or retrospectively on such date as may be specified in that
behalf in that scheme.
Contribution
 There is no contribution from the employee.
 The employer is to contribute 8.33% of the basic wages, dearness allowance and
retaining allowance, if any of the concerned employees as may be specified in the
pension scheme.
 Contribution is not payable when the employee crosses 58 years of age since the
scheme ceases on completion of 58 years
Employees’ Deposit linked Insurance Scheme-

 Section 6C The Central Government made the Employees’ Deposit Linked
Insurance Scheme, 1976 which came into effect from 01.09.1976.
 It applies to all factories and other establishments to which the Act applies
except tea factories in State of Assam.
 The wage ceiling limit under Employees Deposit linked Insurance Scheme has
been increased from `6,500 to `15,000.
 The insurance benefit under the scheme shall be an amount between 2.5 lakhs
and 6 lakhs.
Contribution

 In this Fund the employer shall pay such amount not being more than 1% of the
aggregate of basic wages, dearness allowance and retaining allowance of every
such employee in relation to whom he is the employer.
 The employer shall pay into the Insurance Fund such further amount of money not
exceeding one fourth of the contribution which is required to make as the CG may
from time to time determine to meet all the expenses in connection with the
administration of the scheme other than the expenses towards the cost of any benefits
provided by or under that scheme.
 Where the monthly pay of an employee exceeds ` 15,000 the contribution payable is
restricted to the amounts payable on a monthly pay of `15,000, dearness allowance,
retaining allowance and cash value of food concession.
Determination of moneys due from employers

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Section 7A provides that in case where a dispute arises regarding the applicability of this
Act to an establishment, the Authority concerned may conduct such enquiry as he may
deem necessary decide such dispute and determine the amount due from any employer
under the provision of this Act, the scheme or the Pension Scheme or the Insurance
Scheme as the case may be. Before passing such order the employer concerned shall be
given a reasonable opportunity of representing his case.
Review of order under Section 7A
Section 7B provides that any person aggrieved by an order under Section 7A may apply for a
review of that order to the Officer who passed the order, if he-
• discovered new and important matter of evidence which after the exercise of due
diligence was not within his knowledge; or
• could not be produced by him at the time when the order was made; or
• on account of some mistake; or
• error apparent on the face of the record; or
• for any other sufficient reason.
Such officer may also on his own motion review his order if he is satisfied that it is necessary
so to don any such ground.
Penalties [Section 14]

 For the purpose of avoiding any payment whoever knowingly makes or causes to be
made any false statement or false representation shall be punishable with imprisonment
for a term which may extend to one year, or with fine of ` 5000 or with both.
 An employer, who contravenes or makes default in complying with the provisions of

Section 6 as it relates to the payment of inspection charges, administrative charges shall
be punishable with imprisonment for a term which may extend to three years but-

• Which shall not be less than one year and fine of `10000/- in case of default of
payment of the employees‟ contribution ;
• Which shall not be less than six months and a fine of ` 5000/- in any other case.
 An employer who contravenes or makes default in complying with the provisions of

Section 6C in so far as it relates to the payment of inspection charges, shall be
punishable with imprisonment for a term which may extend to one year but which shall
not be less than six months and shall also be liable to fine which may extend to `5000.
 Any person who contravenes or makes default in complying with, any of the provisions
thereof shall be punishable with imprisonment for a term which may extend to one year
or with fine which may extend to ` 4000 or with both.
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 Whoever, contravenes or makes default in complying with any provision of this Act or of
any condition subject to which exemption was granted shall, if no other penalty is
elsewhere provided by or under this Act for such contravention or non-compliance, be
punishable with imprisonment which may extend to six months but which shall not be
less than one month and shall be liable to fine which may extend to ` 5000.
EMPLOYEES STATE
INSURANCE ACT, CS. Rajeev choudhary [Amit Kumar Classes]
1948
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Introduction
 The Employees‟ State Insurance Act, 1948 is the first major legislation on social
security for the employees in India.
 Provide social protection to employees in contingencies such as illness, long term

sickness or any other health risks due to exposure to employment injury or
occupational hazards.
 The medical facilities are also made available to legal dependents of the
employees who are insured person. This facility is also extended to retired persons
also.
Object of the Act

The object of the Act is to provide for certain benefits to employees in case of sickness,
maternity and employment injury and to make provision for certain other matters in
relation thereto.
Applicability
This Act extends to whole of India. This Act applies to-
• in the first • the appropriate Government may, in • a factory or an establishment

instance consultation with the corporation and to which this Act applies shall
applicable to all where the appropriate Government is continue to be governed by this
factories, a SG, with the approval of CG, after Act notwithstanding that the
including giving one month’s notice of its number of persons employed
factories intention, extend the provisions of therein at any time falls below
belonging to the this Act or any of them, to any other the limit specified by or under
Government, establishment or classes of this Act or the manufacturing
other than season establishments, industrial, process therein ceases to be

factories; commercial, agricultural or otherwise; carried on with the aid of
power.
 The Central Government has since prescribed the wage limit for coverage of an
employee under Section 2(9) of the Act, as Rs.21,000 per month.
 Further it is provided that an employee whose wages (excluding remuneration for

overtime work) exceeds Rs.21,000 a month at any time after and not before the
beginning of the contribution period, shall continue to be an employee until the end of
the said period.
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Important Definitions:
Appropriate Government [Section 2(1)]
 In respect of establishments under the control of the Central Government or a railway
administration or a major port or a mine or oilfield, the Central Government, and
 In all other cases, the State Government.
Dependant [Section 2(6A)]

The term ‘dependant’ as any of the following of a deceased insured person:
• a widow, a legitimate or adopted son who has not attained the age of 25 years, an
unmarried legitimate or adopted daughter;
• a widowed mother;
• if wholly dependent on the earnings of the insured person at the time of his death, a
legitimate or adopted son or daughter who has attained the age of 25 years and is
infirm;
• if wholly or in part dependant on the earnings of the insured person at the time of his
death-
o a parent other a widowed mother;

o a minor illegitimate son, an unmarried illegitimate daughter or a daughter
legitimate or adopted or illegitimate if married and a minor or if widowed and
a minor;
• a minor brother or an unmarried sister or a widowed sister if a minor;

• a widowed daughter-in-law;
• a minor child of a pre-deceased son;

• a minor child of a pre-deceased daughter where no parent of the child is alive; or
• a paternal grand-parent if no parent of the insured person is alive.
Employment injury [Section 2(8)]

A personal injury to an employee caused by accident or an occupational disease arising
out of and in the course of employment, being an insurable employment, whether the
accident occurs or the occupation disease is contracted within or outside the territorial
limits of India.
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Employee [Section 2(9)]
Any person employed for wages in or in connection with the work of a factory or
establishment to which the Act applies and-
• who is directly employed by • who is employed by or through • whose services are

the principal employer, on any an immediate employer, on the temporarily lent or
work of, or incidental or premises of the factory or let on hire to the
preliminary to or connected establishment or under the principal employer
with the work of, the factory or supervision of the principal by the person with
establishment, whether such employer or his agent on work whom the person
work is done by the employee which is ordinarily part of the work whose services are so
in the factory or establishment, of the factory or establishment or lent or let on hire has
whether such work is done by which is preliminary to the work entered into a
the employee in the factory or carried on in or incidental to the contract of service;
establishment or elsewhere; or purpose of the factory or
establishment; or
Includes
 any person employed for wages on any work connected with the administration of the
factory or establishment or any part, department or branch thereof or with the
purchase of raw materials for, or the distribution or sale of the productions of, the
factory or establishment or
 any person engaged as apprentice, not being an apprentice engaged under the
Apprentices Act, 1961 and includes such person engaged as apprentice whose
training period is extended to any length of time
but does • any member of the Indian naval, military or air forces; or
not
include • any person so employed whose wages (excluding remuneration for

overtime work) exceed such wages as may be prescribed by the CG
provided that an employee whose wages as may be prescribed by
the CG at any time after (and not before) the beginning of the
contribution period, shall continue to be an employee until the end
of that period.
The following categories are coming under the purview of the term
‘employee’-
• Canteen workers – Employees State Insurance Corporation V. Shri Ram Chemical
Industries’ – (1978);
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• Employees who are working in a show room or sales office – ‘Bhopal Motors
Private Limited V. Employees’ State Insurance Corporation’ – (1982);
• Workers rendering services outside the place of establishment or shop – ‘Hindu
Jea Band V. Regional Director, Employees’ State Insurance Corporation’ – 1986;
• Part time employees employed on daily rate basis;
• Casual workers – ‘Regional Director, Employees’ State Insurance Corporation V.
South India Flour Mill (Pvt) Limited’ –1986 SC;
Family [Section 2(11)]

The term ‘family’ as all or any of the following relatives of an insured person-
• a spouse;
• a minor legitimate or adopted child dependent upon the insured person;
• a child who is wholly dependent on the earnings of the insured person and who is
o receiving education, till he or she attains the age of 21 years;

o an unmarried daughter;
• a child who is infirm by reason of any physical or mental abnormality or injury and is
wholly dependent on the earnings of the insured person, so long as the infirmity
continues;
• dependent parents, whose income from all sources does not exceed such income as
may be prescribed by the Central Government;
• in case the insured person is unmarried and his or her parents are not alive, a minor
brother or sister wholly dependent upon the earnings of the insured person.
Factory [Section 2(12)]

 Any premises including the precincts thereof whereon ten or more persons are
employed or were employed on any day of the preceding 12 months and in any part
of which a manufacturing process is being carried on or is ordinarily so carried on,

 but does not include a mine subject to the operation of the Mines Act, 1952 or a
railway running shed.
Immediate employer [Section 2(13)]
The terms ‘immediate employer’ in relation to employees employed by or through him, as a
 person who has undertaken the execution, on the premises of a factory or an

establishment to which this Act applies or under the supervision of the principal
employer or his agent, of the whole or any part of any work which is ordinarily part of
the work of the factory or establishment of the principal employer or is preliminary to
the work carried on in, or incidental to the purpose of, any such factory or
establishment, and
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 includes a person by whom the services of an employee who has entered into a
contract of service with him are temporarily lent on hire to the principal employer and
includes a contractor.
Insured Person [Section 2(14)]
The term ‘insured person’ as a person who is or was an employee in respect of whom
contributions are or were payable under the Act and who is by reason thereof, entitled to
any of the benefits provided by this Act.
Permanent partial disablement [Section 2(15A)]

 Such disablement of a permanent nature, as reduces the earning capacity of an
employee in every employment which he was capable of undertaking at the time of
the accident resulting in the disablement.
 Every injury specified in Part II of the Second Schedule shall be deemed to result in
permanent partial disablement.
Permanent total disablement [Section 2(15B)]

 Such disablement of a permanent nature as incapacitates an employee for all work
which he was capable of performing at the time of the accident in such disablement.
 The permanent total disablement shall be deemed to result from every injury specified
in Part I of the Second Schedule or from any combination of injuries specified in Part II
thereof where the aggregate percentage of the loss of earning capacity, as specified
in the said Part II against those injuries, amounts to 100% or more.
Principal Employer [Section 2(17)]
The term ‘principal employer’ as-

• in a factory, the owner or occupier of • in any establishment under • in any other
the factory and includes the managing the control of any department establishment, any
agent of such owner or occupier, the of any Government in India, person responsible
legal representative of a deceased the authority appointed by for the supervision
owner or occupier, and where a person such Government in this and control of the
has been named as the manager of the behalf or where no authority establishment.
factory under the Factories Act, 1948, is so appointed, the head of
the person so named; the Department;
Seasonal factory [Section 2(19A)]

A factory which is exclusively engaged in one or more of the following manufacturing 4
processes, namely, cotton ginning, cotton or jute pressing, decortications of groundnuts, the
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manufacture of coffee, indigo, lac, rubber, sugar (including gur) or tea or any manufacturing
process which is incidental to or connected with any of the aforesaid processes and includes
a factory which is engaged for a period not exceeding seven months in a year-
• in any process of blending, packing or repacking of tea or coffee; or

• in such other manufacturing process as the CG may, by notification in the Official
Gazette, specify.
Temporary disablement [Section 2(21)]
The term ‘temporary disablement’ as a condition resulting from an employment which

requires medical treatment and renders an employee, as a result of such injury, temporarily
incapable of doing the work which he was doing prior to or at the time of the injury.
Wages [Section 2(22)]
All remuneration paid or payable in cash to an employee, if the terms of the contract of
employment, express or implied, were fulfilled and
includes but not include-
any payment to an employee • any contribution paid by the employer to any pension
in respect of any period of fund or provident fund, or under this Act;
authorized leave, lock out, • any travelling allowance or the value of any travelling
strike which is not illegal or concession;
lay-off and other additional • any sum paid to the person employed to defray special
remuneration, if any, paid at expenses entailed on him by the nature of his
intervals not exceeding two employment; or
months, • any gratuity payable on discharge.
Employees’ State Insurance Incorporation [Section 3]
The establishment of Employees’ State Insurance Corporation with effect from 01.10.1948. CS. Rajeev choudhary [Amit Kumar Classes]
The Corporation is a body corporate having perpetual succession and a common seal and
shall by the said name sue and be sued.
Constitution of Corporation
 The Corporation shall consist of a Chairman, a Vice Chairman and other members
representing the interests of employers, employees, state governments, union
territories and medical professions.
 Three members of the Parliament and the Director General of the Corporation are its
ex-officio members. 4
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 The term of office of members of Corporation.
 All orders and decisions of the Corporation shall be authenticated by the signature of
the Director General.
Other bodies of Corporation

Standing Committee [Section 8]
Provides for the constitution of Standing Committee which shall be constituted form among its
members consisting of-
• a Chairman;
• three members of the Corporation;
• three members of the Corporation representing such three State Governments;
• eight members elected by Corporation –
o three members from among the members of the Corporation representing employers;
o three members from among the members of the Corporation representing employees;
o one member from among the members of the Corporation representing medical
profession; and
o one member from among the members of the Corporation elected by Parliament.
o the Director General of the Corporation, ex-officio.
Term of office [Section 9]

The term of office of a member of the Standing Committee shall be two years from the date
on which his election is notified.
A member of the Standing Committee shall cease to hold office when he ceases to be a

member of the Corporation.
Powers of the Standing Committee [Section 18]

 Subject to the general superintendence and control of the Corporation, the Standing
Committee shall administer the affairs of the Corporation and may exercise any of the
powers and perform any of the functions of the Corporation.
 The Standing Committee shall submit for the consideration and decision of the
Corporation all such cases and matters as may be specified in the regulations made in
this behalf.
 The Standing Committee may, in its discretion, submit any other case or matter for the
decision of the Corporation.
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Meetings of Standing Committee, Corporation and Medical Benefit Council
The Standing Committee shall meet at such times and places and shall observe such rules or
procedure in regard to transaction of business at their meetings as may be specified in the
regulations made in this behalf.
Medical Benefit Council [Section 10]

Section 10 provides for the constitution of Medical Benefit Council consisting of-
• the Director General of ESI, ex-officio – Chairman;

• the Director General, Health Services, ex-officio – Co-Chairman;
• the Medical Commissioner of the Corporation – ex-officio;
• one member each representing each state other than Union territories;
• three members representing employers;
• three members representing employees;
• three members representing the medical profession; among them one shall be a
woman.
Term of office
The term of the office of the members of Medical Benefit Council (last three categories)
shall be four years from the date on which the appointment is notified.
Duties of Medical Benefit Council

The duties of the Medical Benefit Council as to-
• advise the Corporation and the Standing Committee on matters relating to the

administration of medical benefit, the certification for purposes of the grant of
benefits and other connected matters;
• have such powers and duties of investigation as may be prescribed in relation to

complaints against medical practitioners in connection with the medical treatment
and attendance; and
• perform such other duties in connection with the medical treatment and attendance
as may be specified in the regulations.
Disqualification [Section 13]

A person shall be disqualified as a member of the Corporation, the Standing Committee or the
Medical Benefit Council- 4
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• if he is declared to be of unsound mind by a competent court; or
• if he is an undischarged insolvent; or
• if he has directly or indirectly by himself or by his partner any interest in a subsisting
contract with, or any work being done for, the Corporation except as a medical
practitioner or as a share holder of a company; or
• if before or after commencement of this Act, he has been convicted of an offence
involving moral turpitude.
Resignation [Section 11]

A member of the Corporation, the Standing Committee or the Medical Benefit Council may
resign his office by notice in writing to the Central Government and his seat fall vacant on
the acceptance of the resignation by Government.
Cessation [Section 12]

 A member of the Corporation, the Standing Committee or the Medical Benefit Council
shall cease to be a member if he fails to attend three consecutive meeting.
 The Corporation, the Standing Committee or the Medical Benefit Council may restore
the membership subject to the rules made by the Government.
Employees’ State Insurance Fund [Section 26]

 All contributions paid under this Act and all other moneys received on behalf of the
corporation shall be paid into this fund.
 The grants, donations and gifts received from the Central Government or any State
Government, local authority or any individual or body whether incorporated or not, are
also paid into this Fund.

Purposes for which the fund may be expended [Section 28]
The Central Government may utilize the State Insurance Fund only for the following purposes:
• payment of benefits and provision of medical treatment and attendance to insured persons
and, where the medical benefit is extended to their families,;
• payment of fees and allowances to members of the Corporation, the Standing Committee
and the Medical Benefit Council, the Regional Boards, Local Committees and Regional and
Local Medical Benefit Councils;
• payment of salaries, leave and joining time allowances, travelling and compensatory
allowances, gratuities and compassionate allowances, pensions, contributions to provident or
other benefit fund of officers and servants of the Corporation and meeting the expenditure in
respect of offices and other services set up for the purpose of giving effect to the provisions of 5
this Act;
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• establishment and maintenance of hospitals, dispensaries and other institutions and the
provision of medical and other ancillary services for the benefit of insured persons and, where
the medical benefit is extended to their families;
• payment of contributions to any State Government, local authority or any private body or
individual, towards the cost of medical treatment and attendance provided to insured persons
and, where the medical benefit is extended to their families, including the cost of any building
and equipment, in accordance with any agreement entered into by the Corporation;
• defraying the cost (including all expenses) of auditing the accounts of the Corporation and of
the valuation of its assets and liabilities;
• defraying the cost (including all expenses) of the Employees’ Insurance Courts set up under
this Act;
• defraying the cost and other charges of instituting or defending any civil or criminal
proceedings arising out of any action taken under this Act;
• defraying expenditure, within the limits prescribed, on measures for the improvement of the
health, welfare of insured persons and for the rehabilitation and re-employment of insured
persons who have been disabled or injured; and
• such other purposes as may be authorized by the Corporation with the previous approval of
the Central Government.
Contributions
 The present rate contribution is 3.25% and 0.75% of workers’ wages by employers and
employees respectively.
 Contribution against employee must be deposited within due date. One shall not be
able to deposit contribution online after 42 days from the end date of the contribution
period.

 Employee whose salary per day is ` 176/- or less need not to pay Employee's
contribution and the same will be paid by the Govt. However, employer will have to
pay their share of contribution.
Principal employer to pay contribution in the first instance [Section 40]

 Principal employer shall pay in respect of all employer, whether directly employed by
him or by or through an immediate employer, both the employer’s contribution and
the employee’s contribution.
 Any sum deducted by the principal employer from wages shall be deemed to have
been entrusted to him by the employee for the purpose of paying the contribution in
respect of which it was deducted.
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 The principal employer shall bear the expenses of remitting the contributions to the
corporation.
Recovery of contribution from immediate employer [Section 42]

 A principal employer, who has paid contribution in respect of an employee employed
through an immediate employer, shall be entitled to recover the amount of the
contribution so paid from the immediate employer, either by deduction from any
amount payable to him by the principal employer under any contract or as a debt
payable by the immediate employer.
 The immediate employer shall maintain a register of employees employed by or

through him and submit the same to the principal employer before the settlement of
any amount payable by him.
Recovery of contributions
 Any contribution payable under this Act may be recovered as an arrear of land revenue.
 The authorized officer may issue certificate to Recovery Officer, who in turn proceed to
recover the amount by one or more of the modes mentioned below-
• attachment and sale of moveable • arrest of the • approving a receiver for the
or immovable property of the employer and his management of the movable or
factory or establishment or, as the detention in immovable properties of the
case may be, the principal, or prison; factory or establishment or, as
immediate employer; the case may be, the employer.
The attachment shall first be effected against the properties of the factory or
the establishment and such attachment and sale is insufficient for recovering
the whole of the amount of arrears, the Recovery Officer may take such
proceedings against the property of the employer
Benefits [Section 46]
The insured persons , their dependents shall be entitled to the following benefits-
• periodical payments to any insured person in case of his sickness;

• periodical payments to an insured woman in case of confinement or mis-carriage or
sickness arising out of the pregnancy, confinement, premature birth of child or
miscarriage;
• periodical payments to an insured person suffering from a disablement as a result of
an employment injury sustained as an employee;
• periodical payments to such dependants of an insured person who dies as a result of
an employment injury sustained as an employee;
• medical treatment for and attendance on insured persons;
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• payment to the eldest surviving member of the family of an insured person, who has
died, towards the expenditure on the funeral of the deceased insured person; if the
injured person at the time of his death does not have a family, the funeral payment will
be paid to the person who actually incurs the expenditure.
The amount of such payment shall not exceed such amount as may be prescribed by
the Central Government. The claim for such payments shall be made within 3
months of the death of the insured person or within such extended period as the
Corporation allow in this behalf.
Adjudication of disputes and claims [Section 74]

The State Government shall constitute an ESI Court for such local area as may be specified in the
notification. Section 75 provides that ESI Court may decide any question or dispute arises as to-
• whether any person is an employee within the meaning of this Act or whether he is
liable to pay the employee‟s contribution; or
• the rate of wages or average daily wages of an employee for the purposes of this Act;
or
• the rate of contribution payable by a principal employer in respect of any employee;
• the person who is or was the principal employer in respect of any employee; or
• the right of any person to any benefit and as to the amount and duration thereof; or
• any direction issued by the Corporation on a review of any payment of dependants‟
benefit; or
• any other matter which is in dispute between-
o a principal employer and the Corporation; or

o a principal employer and an immediate employer; or
o a person and the Corporation; or
o an employee and a principal or immediate employer,

The following claims shall be decided by ESI Court-
• claim for the recovery of contributions from the principal employer;
• claim by a principal employer to recover contributions from any immediate employer;
• claim against a principal employer;
• claim for the recovery of the value or amount of the benefits received by a person
when he is not lawfully entitled thereto; and
• any claim for the recovery of any benefit admissible under the Act.
An appeal shall lie to the High Court from an order of ESI Court if it involves a
substantial question of law. The appeal shall be filed within 60 days from the date of
the order of ESI Court.
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PAYMENT OF
BONUS ACT, 1965
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Introduction
The Payment of Bonus Act, 1965 provides for payment of bonus to persons employed in
certain establishments
 on the basis of profits or

 on the basis of production or productivity and
 for matters connected therewith.
Definition of the term Bonus

The term “bonus” is not defined in the Payment of Bonus Act, 1965.
Websters International Dictionary defines bonus as “something given in addition to what is ordinarily
received by or strictly due to the recipient”.
Objects and applicability

Objectives of (i) impose a statutory obligation on an employer of every establishment covered by
the Act to pay bonus to employees in the establishment;
this Act (ii) lay down principle and formula for calculation of bonus;
(iii) provide for payment of minimum and maximum bonus and

(iv) provide the scheme of set-on and set-off; and
(v) provide machinery for enforcement of liability for payment of bonus.
Applicability of This Act extends to the whole of India

the Act The Act shall apply to:
(a) every factory; and
(b) every other establishment in which twenty or more persons are employed on
any day during an accounting year.
Provided that the appropriate Government may, by notification apply the

provisions of this Act with effect from such accounting year as may be specified in the
notification
to any establishment including an establishment being a factory as defined
under the Factories Act, 1948 employing less than twenty persons, after
giving not less than 2 month notice.
However, the number of persons so specified shall in no case be less than ten.
An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number
of persons employed therein falls below no. as specified in the Act.
A part-time employee is also an employee for the purpose of calculating the number of employees i.e., 20 or more.
[Automobile Karamchari Sangh Vs. Industrial Tribunal, (1976) 38 FLR 268(All)]
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Application of Provisions of this Act will be applicable on the public sector establishment if the
5
the Act to following conditions are satisfied
establishments (i) selling of goods produced or manufactured or renders any services in competition
in Public Sector with the private sector establishment in any accounting year, and
in certain cases
(ii) the total income out of such sale or rendering services or both is not less than 20%
[Section 20] of the gross income for that year,
Non-Applicability of this Act (SEC. 32)

The Act shall not apply to the following classes of employees:
(i) employees employed in GIC and LIC;

(ii) seamen as defined in the Merchant Shipping Act, 1958;
(iii) employees employed by an establishment engaged in any industry called on by or under the
authority of any department of C.G. or a S.G. or a local authority;
(iv) employees employed by:

(a) the Indian Red Cross Society or its branches;
(b) universities and other educational institutions;
(c) institutions established not for the purpose of profit;
(v) employees employed by the Reserve Bank of India;
(vi) employees employed by:

(a) the Industrial Finance Corporation of India (IFCI);
(b) any Financial Corporation or any Joint Financial Corporation established under the State
Financial Corporations Act, 1951;
(c) the Deposit Insurance Corporation;
(d) the National Bank for Agriculture and Rural Development (NABARD);
(e) the Unit Trust of India (UTI);
(f) the Industrial Development Bank of India (IDBI);
(g) the Small Industries Development Bank of India (SIDBI) established under the Small Industries
Development Bank of India Act, 1989;
(h) the National Housing Bank;
(i) any other Public financial Institution (other than Banking Company) which the C.G. may by
notification specify;

Point to be remembered
Apart from the above, the appropriate Government has powers under Section 36 to exempt any
establishment or class of establishments from all or any of the provisions of the Act for a specified
period
if it is of the opinion that it will not be in the public interest to apply all or any of the provisions
of this Act thereto and after imposing such conditions, if any, as it think fit.
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Accounting Year [Section 2(1)]
in relation to a The year ending on the day on which the books and accounts of the corporation are
to be closed and balanced;
corporation
in relation to a The period for which any P&L account of the company laid before it in AGM is made
up, whether that period is a year or not;
company
in any other case (a) the year commencing on the 1st day of April; or
(b) if the accounts of an establishment are closed and balanced on any day other than
the 31st day of March, then the year ending on the day on which its accounts are
so closed and balanced;
Provided that an option once exercised by the employer under paragraph (b) above
shall not again be exercised except with the previous permission in writing of the
prescribed authority and upon such conditions as that authority may think fit.
Allocable & Available surplus

Allocable  In relation a company (other than a banking company) which has not made
Surplus the arrangements prescribed under the Income-tax Act for the declaration and
[Sec.2(4)] payment of the dividends payable out of its profits in accordance with the
provisions of Section 194 of that Act, 67% of the available surplus in an
accounting year;
 in any other case: 60% of such available surplus.
Available
Surplus It means the available surplus in an accounting year as defined and computed
under Section 5 of the Act.
[Sec. 2(6)]:

Available surplus shall be the gross profit for that year after deduction of certain
charges(specified in Section 6) and by addition of the amount equal to the
difference of certain items(mentioned in section 7).
Calculation of available surplus

Gross profit for the purpose of bonus XXX
Less: certain amount as deduction u/s 6 XXX
Add: amount of tax saving

(tax calculated on G.P. before deducting bonus
– tax calculated on G.P. after deducting bonus ) XXX
Available surplus. XXX

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Definition of Employer & Employee
 Any person (other than an apprentice) employed on a salary or wages not
Employee exceeding Rs. 21,000 per mensem
[Sec.2(13)]
 in any industry
 to do any skilled or unskilled, manual, supervisory, managerial, administrative,

technical or clerical work of hire or reward,
 whether the terms of employment be express or implied.
Part time permanent employees working on fixed hours are

employees.
Employer in relation to an Include the owner or occupier of the factory, including the agent of
such owner or occupier, the legal representative of a deceased
[Sec.2(14)] establishment owner or occupier, and where a person has been named as a
which is a factory manager of the factory, the person so named; and
in relation to any Include the person who, or the authority which, has the ultimate
control over the affairs of the establishment and where the said
other affairs are entrusted to a manager, managing director or
establishment, managing agent, such manager, managing director or managing
agent.
ESTABLISHMENT (SECTION 3)
Establishment shall include all its departments, undertakings and branches wherever it has so
whether situated in the same place or in different places and the same shall be treated as parts
of the same establishment:
PROVIDED THAT where for any accounting year, a separate balance-sheet and profit and loss account
are prepared and maintained in respect of any such department or undertaking or branch then such

department, undertaking or branches shall be treated as a separate establishment for that year,
unless such department, or undertaking or branch was, immediately before the commencement of
that accounting year treated as part of establishment for the purpose of computation of bonus.
Establishment in Public Sector [Section 2(16)]

It means an establishment owned, controlled or managed by:
(a) a Government company as defined in Section 2(45) of the Companies Act, 2012;
(b) a corporation in which not less than forty percent of its capital is held (whether singly or taken
together) by:
(i) the Government; or

(ii) the Reserve Bank of India; or
(iii)a corporation owned by the Government or the Reserve Bank of India.
5
8
Salary or Wage [Section 2(21)]
Means all remuneration (other than remuneration in respect of over-time work) capable
of being expressed in terms of money,
which will be payable to an employee in respect of his employment or of work

done, if the terms of employment, express or implied, were fulfilled,
Includes dearness allowance (that is to say, all cash payments, by whatever name called, paid to an
employee on account of a rise in the cost of living)
but does not (i) any other allowance which the employee is for the time being entitled to;
(ii) HRA or of supply of light, water, medical attendance or other amenity or of any service
include: or of any concessional supply of food grains or other articles;
(iii) any travelling concession;
(iv) any bonus (including incentive, production and attendance bonus);
(v) Employer contribution to any pension fund or provident fund or for the benefit of the
employee under any law for the time being in force;
(vi) any retrenchment compensation or any gratuity or other retirement benefit payable to
the employee;
(vii) any commission payable to the employee.
It may be noted that where an employee is given, in lieu of the whole or part of the salary or
wage payable to him, free food allowance or free food by his employer, such food allowance or
the value of such food shall be deemed to form part of the salary or wage for such employee.
Who is entitled to Bonus?

General Provision Every employee of an establishment covered under the Act is entitled to bonus in an
accounting year if:

(i) who has worked for a period of not less than 30 working days in that year, and
(ii) Whose salary or wage not exceeding Rs. 21,000 per mensem.
Classification of
Himachal Pradesh State Electricity Board and Others Vs Krishan Dutt 2010
employees
The term employees itself include
daily wages employees,
temporary, permanent employees
weekly paid, monthly paid employees etc.
subject to the condition that he should have worked in the establishment for not
less than 30 working days in an accounting year.
Bonus to the Project Manager, Ahemdabad Project,ONGC vs. Sham Kumar

employees Sahegal [1995]
prevented from 5
working and If an employee is prevented from working and subsequently reinstated in service,
9
subsequently employee’s statutory liability for bonus cannot be said to have been lost. Nor can the
employer refuse for such bonus.
reinstated
Conclusion-employees entitle or not entitle for bonus

Employees entitle for Bonus Employees not entitled for bonus
 A temporary workman is entitled to bonus According to section 9 of the Act, if an employee

on the basis of total number of days worked who has been dismissed from service for any of
by him. the following act then such employee will be
disqualified from the bonus not only for that
 A part time employee as a sweeper engaged accounting year but from the Act:-
on a regular basis is entitled to bonus
(a) fraud; or
 A retrenched employee is eligible to get
bonus provided he has worked for minimum (b) riotous or violent behaviour while on the
qualifying period. premises of the establishment; or
 A dismissed employee reinstated with back (c) theft, misappropriation or sabotage of any
wages is entitled to bonus. [Gammon India property of the establishment is not
Ltd. vs. Niranjan Das [1984]. entitled for bonus.
 A piece-rated worker is entitled to bonus. Following persons also not entitle for Bonus
[Mathuradas Kanji vs. L.A. Tribunal [1958]
SC]. An apprentice is not entitled to bonus.
Employees of certain establishments
 Employees employed through contractors on specified in section 32 are not covered by
building operations shall be entitled to this Act.
bonus
CALCULATION OF AMOUNT PAYABLE AS BONUS

Computation of In case of Banking Company, the gross profit is required to be calculated in the manner
gross profits

specified in the first Schedule;
In any other case, such gross profits are to be calculated in the manner specified in the
Second Schedule.
Deduction from any amount of depreciation admissible under sec.32 of the Income-tax Act, 1961;
gross profits
any amount by way of development rebate, investment allowance, or
U/s 6 development allowance which the employer is entitled to deduct from his income
under the Income Tax Act.
any direct tax which the employer is liable to pay for the accounting year in
respect of his income, profits and gains during the year.
such further sums as are specified in respect of the employer in the Third Schedule.
Add Tax Saving

due to bonus
An amount equal to the tax saved on the account of bonus in respect of the 6
immediately preceding accounting year, should be added (i.e. tax calculated on G.P.
0
before deducting bonus – tax calculated on G.P. after deducting bonus)
Available
It means the available surplus Computed under Section 5.
Surplus
Thus, the available surplus in respect of any accounting year comprises of
 the gross profits for that year after deducting therefrom certain prior charges
referred to in Section 6 and
 adding thereform an amount equal to the tax saved on the account of bonus in
respect of the immediately preceding accounting year.
Amounts Amount as calculated out of the available surplus will be considered as allocable
surplus which will be available for the distribution of the bonus such as
payable as
bonus o in relation a company (other than a banking company): 67% of the available
[allocable surplus in an accounting year;
surplus] o in any other case: 60% of such available surplus.
Payment of minimum & maximum bonus (Sec.10 read with sec.11)

Payment of Subject to the other provisions of this Act every employer shall be bound to pay to every
employee in respect of any accounting year a minimum bonus which shall be
Minimum
Bonus  8.33% of the salary or wage earned by the employee during the accounting year, or
 Rs.100/-,
(Section 10)
whichever is higher, whether or not the employer has any allocable surplus in the
accounting year:
 where an employee has not completed fifteen years of age at the beginning of the
accounting year, for Rs.100, Rs.60/- were substituted.

Case Study: State vs. Sardar Dalip Singh Majithia, 1979,
It was held that, even if the employer suffers losses during the accounting year he is bound to pay minimum
bonus as prescribed by Section 10 as:
o it is a statutory right of employer to get the bonus and

o at the same time the statutory liability upon the employers covered by the Act to pay minimum bonus.
Payment of
Where in respect of any accounting year referred to in Section 10, the allocable
Maximum Bonus surplus exceeds the amount of minimum bonus payable to the employees under
(Section 11) that Section, the employer shall,
 in lieu of such minimum bonus, be bound to pay to every employee bonus

which shall be an amount in proportion to the salary or wage earned by the
employee during the accounting year
 subject to a maximum of 20% of such salary or wage. 6
1
In computing the allocable surplus under this Section, the amount set on or the
amount set off under the provisions of Section 15 shall be taken into account in
accordance with the provisions of that Section.
Calculation of bonus for Certain employees & Working days etc.

Calculation of bonus Where the salary or wage of an employee exceeds Rs.7,000 per mensem, the
with respect to bonus payable to such employee under Section 10 or, as the case may be, under
certain employees Section 11, shall be calculated as if his salary or wage were only Rs. 7,000
(Sec. 12) per mensem
Calculation of According to section 14 of the Act, following days shall be deemed to be the
working days of an employee and shall be counted while calculating the total
Working Days working days on which he has been on work for the purpose of bonus:
[sec. 14]
a) laid off under an agreement or as permitted by standing orders under the
Industrial Employment (Standing Orders) Act, 1946 or under the Industrial
Disputes Act, 1947 or under any other law applicable to the establishment;
b) on leave with salary or wage;
c) absent due to temporary disablement caused by accident arising out of

and in the course of his employment; and
d) on maternity leave with salary or wage, during the accounting year (in
case of female employee).
Proportionate Where an employee has not worked for all the working days in an accounting
year, the minimum bonus of Rs.100/- or, as the case may be, of Rs.60/-, if such
reduction in bonus in
bonus is higher than 8.33 per cent of his salary or wage for the days he had
certain cases worked in that accounting year, shall be proportionately reduced.
(Sec.13)
Case Study: Sakhkkar Mills Mazdoor Sangh V. Gwalior Sugar Co. Ltd.(1985)
The section 13 as to proportionate reduction in bonus shall not apply on the employee of seasonal factory.

Here the word ‘working days in any accounting year’ mean those days of the year during which the employee
concerned is actually allowed to work.
Set On and Set Off of Allocable Surplus (Section 15)

Introduction
 The provisions of set-on and set-off of allocable surplus will be considered while
deciding the minimum and maximum of bonus.
 The available allocable surplus for the relevant accounting year has to be arrived at
after taking into account the figures of set-on and set-off in the previous year.
6
Provision o If in an accounting year, the allocable surplus exceeds the amount of maximum
2
relating to bonus payable to the employees in the establishment under Section 11,
set-on o Such excess amount subject to the 20% of the total salary or wage of employees
employed in the establishment in that accounting year be carried forward for
being set on in the succeeding accounting year but maximum upto 4 th accounting
year (4th year inclusive).
o This excess is to be utilised for the purpose of payment of bonus.
Provision ♦ If there is no available surplus or the allocable surplus in respect of that year is
relating to insufficient for payment of bonus to the employee in the establishment under Section
10 and
set-off
♦ there is no amount or sufficient amount carried forward and set on under Section
15(1) which could be utilised for the purpose of payment of minimum bonus.
♦ In such a situation minimum amount or the deficiency as the case may be, shall be
carried forward for being set off in the succeeding accounting year and so on in the
manner as specified in the Fourth Schedule. .[Section 15(2)]
If in any accounting year any amount has been carried forward and set on or set off under
this Section.
Then, while calculating bonus for the succeeding accounting year, the amount of set on or
set off carried forward from the earliest accounting year shall first be taken into account.
Adjustment of customary or interim bonus against bonus payable under

the Act (Sec. 17):
Adjustment of  If in any accounting year, an employer has paid any puja bonus or other
customary or puja customary bonus to any employee,
bonus  The employer shall be entitled to deduct such amount of bonus form the bonus
payable by him for that accounting year.

Adjustment of o If the employer has paid the part of the bonus to the employee before the date
on which such bonus become payable
interim bonus:
o The employer shall be entitled to deduct such amount of bonus form the bonus
payable by him for that accounting year.
Deduction of  where in any accounting year, an employee is found guilty of misconduct

certain amounts causing financial loss to the employer,
from bonus
 the employer can lawfully deduct the amount of loss from the amount of
payable under the bonus payable by him to the employee in respect of that accounting year
Act (Sec.18) only.
 In such a case, the employee shall get only the balance, if there be any.
6
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Time-Limit for payment of bonus (Section 19):
If no dispute in
 The amount of bonus payable to the employees shall be paid by the employer
respect of bonus within 8 months form the closure of the accounting year
 It may however be noted that such period can be extended upto maximum 2
years by the appropriate government or by the specified authority only on an
application of the employer and on sowing sufficient reasons.
If there is a o Where any dispute is pending before the authority in respect of the payment of
dispute in respect bonus between the employer and employee
of the bonus
o The amount of bonus shall be paid within 1 month from the date on which the
award become enforceable or settlement become effective
Recovery of the bonus due from an employer (Section 21) :

If the amount of bonus is due to an employee from the employer not paid then the following steps
can be taken for the recovery of the amount of bonus so due:
Application for  An application can be made by the employee to the appropriate government for
recovery the recovery of the amount of bonus due.
 Application can also be made by any other person as authorized in writing by the
employee in this regard.
 It may be noted that such application can be made even by his assignee or heirs in
case of deceased employee.
Time period of o The application is required to be made within a period of 1 year from the date
on which amount of bonus become due.
making
application o It may be noted that, an application may be entertained even after the expiry of
aforesaid period, if the appropriate Government is satisfied that the applicant had
sufficient cause for not making the application within the said period.
Issue of The appropriate government if satisfied, on receipt of the aforesaid

certificate to application, that the amount of bonus is so due.
the collector The appropriate government shall issue a certificate for the recovery of the
bonus amount to the Collector.
Recovery of The collector shall, after receipt of the certificate by the appropriate
bonus by government, proceed to recover the amount of bonus so due.
collector The recovery shall be in the same manner as an arrear of the land revenue.
Penalty and Offence [sec.28 read with sec.29]

Penalty A person shall be liable to punishment for a term which may extend to 6 month or fine
which may extend upto Rs.1000/- or both if:
(Section 28): 6
(i) he contravenes any of the provisions of this Act or any rule framed thereunder; or
4
(ii) if he fails to comply with any direction or requisition which may have been given or
made to him under this Act.
Offences by If an offence under this Act is committed by a Company, then every person who, at the time
of committing the offence was
Companies
(Section 29):  in charge of and
 responsible to the company for the conduct of its business,
shall be deemed to be guilty of the offence and liable to be proceeded against and punished
accordingly.
Special Provision:-Bonus Linked with Production or Productivity

(Section 31A)
An annual bonus can also be linked with the production or productivity in lieu of bonus based on the
profit, if there in an agreement or settlement between the employer and employee.
According the Section 31A of the Payment of Bonus(Amendment) Act, 1976,
 If there is an agreement between employer and employee,
 then the employees are entitled to receive the bonus as per the terms of the agreement
 subject to the fulfillment of the conditions as specified u/s 31A.
Conditions o Any such agreement/settlement whereby the employees relinquish their right
require to be to receive minimum bonus under Section 10, shall be null and void.
fulfilled
o The amount of bonus payable to the employees as per the agreement shall not
be in excess o the 20% of the salary/wages of the employees during the
relevant accounting year.
6
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ACT, 1948
MINIMUM WAGES
6
6
INTRODUCTION
 The Minimum Wages Act was enacted primarily to safeguard the interests of the workers engaged
in the unorganized sector. The Act provides for fixation and revision of minimum wages of the
workers engaged in the scheduled employments.
 Under the Act, both central and State Governments are responsible, in respect of scheduled
employments within their jurisdictions to fix and revise the minimum wages and enforce payment
of minimum wages.
 According to the Act, the appropriate Governments review/revise the minimum wages in the
scheduled employments under their respective jurisdictions at an interval not exceeding five
years.
Points to be Remembered
 However, there is large scale variation of minimum wages both within the
country and internationally owing to differences in prices of essential
commodities, paying capacity, productivity, local conditions, items of the
commodity basket, differences in exchange rates etc.
SCOPE & OBJECTIVES OF THE ACT

Scope of the The Minimum Wages Act was passed in 1948 and it came into force on 15th March, 1948.
Act The National Commission on Labour has described the passing of the Act as landmark in the
history of labour legislation in the country. The Act extends to whole of India.
Objectives The main objective of the Minimum Wages Act is to prevent exploitation of labour and for
of the Act that purpose, it has empowered the appropriate Government to take steps to prescribe
minimum rate of wages in certain employments as specified in the Schedule to this Act.

Case Study: Unichoyi v. State of Kerala (1962 SC)
This Act is a landmark in the history of labour legislation in the country. The philosophy of the
Minimum Wages Act and its significance in the context of conditions in India has been explained by
the Supreme Court in this case as follows:-
 “What the Minimum Wages Act purports to achieve is to prevent exploitation of labour by way
of prescribing the minimum rates of wages in the scheduled industries through empowering the
appropriate government.
 In an underdeveloped country which faces the problem of unemployment on a very large scale, it
is not possible to provide work to the labour even on starvation wages (i.e. money paid to workers
is not enough to pay for the things that are needed to live).
 The policy of the Act is to prevent the employment of such sweated labour in the interest of
general public and so in prescribing the minimum rates. 6
7
Appropriate Government [Section 2(b)]

The Central In relation to any scheduled employment carried on by or under the authority of the Central
Government or a railway administration, or in relation to a mine, oilfield or major part or any corporation
established by a Central Act, and
The State In relation to any other scheduled employment,.

Government
Employee [Section 2(i)]

Means any person who is employed for hire or reward to do any work, skilled or unskilled, manual
or clerical in a scheduled employment in respect of which minimum rates of wages have been
fixed;
includes  an outworker to whom any articles or materials are given out by another person to be
made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise
processed for sale purpose of the trade or business of that other person where the
process is to be carried out either in the home of the out-worker or in some other
premises, not being premises under the control and management of that person;
 also includes an employee declared to be an employee by the appropriate Government;
but does not any member of Armed Forces of the Union.

include
Definition of Employer

any person who employs, whether directly or through another person (even through contractor),
or whether on behalf of himself or any other person, one or more employees in any scheduled
employment in respect of which minimum rates of wages have been fixed under this Act, and also
include
In case of a Any person named under Sec. 7(1)(f) of the Factories Act, 1948, as manager of the factory;
factory
In any scheduled  a person or authority appointed by the appropriate Govt. for the supervision and
control of employees, or
employment
under the control  where no person or authority has been so appointed, the head of the Ministry or the
Department concerned,
of CG/SG
in any scheduled  the person appointed by such authority for the supervision, and control of employees
employment
or 6
8
under any local  where no person has been so appointed, the chief executive officer of the local
authority,
authority
In any other any person responsible to the owner of the supervision and control of the employees or for
the payment of wages
case,
CASE STUDY
Nathu Ram Shukla v. State of Madhya Pradesh (1960 MP)
It was held that if minimum wages have not been fixed for any branch of work of any scheduled
employment, the person employing workers in such branch is not an employer with the meaning of the Act.
Loknath Nathu Lal v. State of Madhya Pradesh (1960 M.P.)

An out-worker who prepared goods at his residence, and then supplied them to his employer was held as
employee for the purpose of this Act.
Wages [Section 2(h)]

Means All remunerations capable of being expressed in terms of money, which would, if the
terms of the contract of employment, express of implied, were fulfilled, be payable to a person
employed in respect of his employment or of work done in such employment and includes
house rent allowance
Does not (i) the value of any house accommodation, supply of light, water medical; any other
include amenity or any service excluded by general or social order of the appropriate Govt.;
(ii) contribution by the employer to any PF or under any scheme of social insurance;
(iii) any travelling allowance;
(iv) any gratuity payable on discharge.
6
9
0
7
Fixation of minimum rates of wages [section 3]
 Section 3 provides that the ‘appropriate Government’ shall fix the minimum rates of wages, payable
to employees in an employment specified in Part I and Part II of Schedule to this Act and in an
employment added to either part by notification under Section 27..
 In the case of an employment specified in Part I, the minimum rates of wages must be fixed for the
entire State, no parts of the State being omitted.
 In case of the employments specified in Part II of the Schedule, the minimum rates of wages may
not be fixed for the entire State. Parts of the State may be left out altogether.
CASE STUDY
Basti Ram v. State of A.P. 1969, (A.P.)
 The rates to be fixed need not be uniform. Different rates can be fixed for different zones or localities:
Bijoy Cotton Mills v. State of Ajmer: The constitutional validity of Sec.3
 The Supreme Court held that the restrictions imposed upon the freedom of contract by the fixation of
minimum rate of wages, though they interfere to some extent with freedom of trade or business
guarantee under Article 19(1)(g) of the Constitution, are not unreasonable and being imposed and in
the interest of general public and with a view to carrying out one of the Directive Principles of the State
Policy in Article 43 of the Constitution.
Point to be Remembered:
Notwithstanding the provisions of Section 3(1)(a), the “app. Govt.” may not fix mini. rates of wages in
respect of any scheduled employment in which less than 1000 employees in the whole State are engaged. But
when it comes to its knowledge after a finding that this number has increased to 1,000 or more in such
employment, it shall fix minimum wage rate.
REVISION OF MINI. WAGES & MANNER OF FIXATION/REVISION OF MINI.WAGES

Revision of minimum According to Section 3(1)(b), the ‘appropriate Government’ may review at such
wages intervals as it may thing fit, such intervals not exceeding five years, and revise the
minimum rate of wages, if necessary. This means that minimum wages can be revised

earlier than five years also.
Manner of The ‘appropriate Government’ may fix minimum rate of wages for:
fixation/revision of
minimum wages [Sec. (a) time work, known as a Minimum Time Rate;
3(2)] (b) piece work, known as a Minimum Piece Rate;
(c) Guaranteed Time Rate for those employed in piece work for
securing a minimum rate of wages on a time work basis; and
(d) Over Time Rate for overtime work done by employee.
different minimum (i) different scheduled employments;

rates of wages may (ii) different classes of work in the same scheduled employments;
be fixed for [Sec. (iii) adults, adolescents, children and apprentices;
3(3)] (iv) different localities
7
1
Minimum rate of Any minimum rate of wages fixed or revised by the appropriate Government under
wages (sec.4) Section 3 may consist of –
(i) a basic rate of wages and a special allowance at a rate to be adjusted, at

such intervals and in such manner as the appropriate Govt. may direct; or
(ii) a basic rate of wages and the cash value concession in respect of supplies of
essential commodities at concessional rates where so authorized excluding
cost of living allowance; or
(iii) basic rate, the cost of living allowance and the cash value of the concessions,
if any.
 The cost of living allowance & the cash value of the concessions in respect of supplies essential
commodities at concessional rates shall be computed by the competent authority at such
intervals and in accordance with such directions specified or given by the app. Govt.
7
2
PROCEDURE FOR FIXING AND REVISING MINIMUM WAGES
(SECTION 5)
First Method  The appropriate Government may appoint as many committees and sub-committees as it
i.e. Committee considers necessary to hold enquiries and advise it for fixing or revising such rate, as the
case may be.
Method
[Sec. 5(1)(a)]  After considering the advise of the committee or committees, the appropriate
Government shall, by notification in the Official Gazette fix or revise the minimum rates of
wages.
 The wage rates shall come into force from such date as may be specified in the notification.
If no date is specified, on the expiry of 3 months from the date of the issue of such
notification.
Case Study: Edward Mills Co. v. State of Ajmer SC,
 The Supreme Court held that Committee appointed under Section 5 is only an advisory body
and that Government is not bound to accept its recommendations.
Second  When fixing minimum wages, the appropriate Government shall by notification, in the
Method i.e. Official Gazette publish its proposals to inform the persons likely to be affected thereby
and specify a date not less than 2 months from the date of notification, on which the
Notification
proposals will be taken into consideration.
Method
[Sec. 5(1)(b)]  If any representations so received, will be considered by the appropriate Government and
also consult the Advisory Board constituted under Sec.7 and thereafter fix or revise the
minimum rates of wages by notification in the Official Gazette.
 The new wage rates shall come into force from such date as may be specified in the
notification. If no date is specified, on expiry of 3 months from the date of its issue.
 Minimum wage rates can be revised with retrospective effect.
COMPOSITION OF COMMITTEE [SEC.9]

 It shall consist of persons to be nominated by the appropriate Government representing
employers and employee in the scheduled employment, who shall be equal in number and
 Independent persons not exceeding 1/3rd of its total number of members, out of which one shall be
appointed as the Chairman of the Committee by the appropriate Government.
ADVISORY BOARD [SEC.7]

AB is constituted by the appropriate Government for the purpose of:-
Constitution
 co-ordinating the work of committees & sub-committees appointed under Sec. 5 of
the Act; and
 advising the appropriate Government in the matter of fixing and revising of mini.
rates of wages. 7
3
Composition  The advisory board shall consist of persons to be nominated by the appropriate
Government representing employers & employees in the scheduled employment who
shall be equal in no., and
 Independent persons not exceeding 1/3rd of its total number of members, one of
such persons shall be appointed as the Chairman by the appropriate Government.
CENTRAL ADVISORY BOARD [SEC.8]

The Central Government shall constitute a Central Advisory Board for:-
Constitution
 the purpose of advising the CG and SG in the matters of fixation and revision of
minimum rates of wages and other matters connected under this Act; and
 for coordinating work of the advisory boards.
 The Central Advisory Board shall consist of persons to be nominated by the CG

Composition representing employers & employees in the scheduled employment who shall be equal
in number and
 Independent persons not exceeding 1/3rd of its total number of members, one of
such independent persons them shall be appointed as the Chairman of the Board by
Central Government.
PROVISIONS RELATING TO PAYMENT [SEC.11 READ WITH 12]

Minimum  Section 11 of the Act provides that minimum wages payable under the Act shall be paid in
wage – cash.
whether to  But where it has been the custom to pay wages wholly or partly in kind, the appropriate
be paid in Government, on being satisfied, may approve and authorize such payments.
cash or
 Such Government can also authorize for supply of essential commodities at concessional
kind
rates.
[Sec.11]

Payment of According to Sec.12 the employer shall pay to every employee engaged in a scheduled
minimum employment under him
wages is  Such wages which is not less than the minimum rate of wages fixed by the appropriate
obligatory Govt. under Sec.5 for that class of employment
on
employer  without deduction except as may be authorized, within such time and subject to such
(sec. 12) conditions, as may be prescribed.
Point to be Remembered:
 Payment of less than the minimum rates of wages notified by the appropriate
Government is an offence.
Point to be Remembered 7
4
1. According to Sec.15 where the rate of wages has been fixed under the Act by the day for an employee
and if he works on any day on which he employed for a period less than the requisite number of hours
constituting a normal working day,
 he shall be entitled to receive wages for that day as if he had worked for a full working day
subject to the condition that such failure is not caused by his unwillingness to work.
2. According to section 17, where an employee is engaged in work on piece work for which minimum
time rate and not a minimum piece rate has been fixed, wages shall be paid in terms of Section 17 of
the Act at minimum time rate.
PAYMENT OF OVERTIME (Section 14)

 When an employee, whose minimum rate of wages is fixed under this Act by the hours, the day
or by such longer wage period as may be prescribed, works on any day in excess of the number of
hours constituting a normal working day, the employer shall pay him for every hour or part of an
hour so worked in excess at the overtime rate fixed under this Act or under any other law whichever is
higher.
 Payment for overtime work can be claimed only by the employees who are getting minimum rate of
wages under the Act and not by those getting better wages.
OFFENCES AND PENALTIES

According to Section 22 of the Act provides that any employer who:
(a) pays to any employee less than the minimum rates of wages fixed for that employee’s class of work or
less than the amount due to him under the provisions of this Act or
(b) contravenes any rule or order made under Section 13,
shall be punishable with imprisonment for a term which may extend to six months or with fine which
may extend to Rs.500 or with both.
 It may further be noted that, according to section 22A, if any employer who contravenes any provision of CS. Rajeev choudhary [Amit Kumar Classes]
this Act or of any rule or order made thereunder shall if no other penalty is provided then he shall be
punishable with fine which may extend to Rs.500.
7
5
PAYMENT OF
WAGES ACT, 1936
6
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INTRODUCTION
 The Payment of Wages Act, 1936 is a central legislation which has been enacted to
regulate the payment of wages to workers employed in certain specified industries and to
ensure a speedy and effective remedy to them against unauthorized deductions and/or
unjustified delay caused in paying wages to them.
 It applies to the persons employed in a factory, industrial or other establishment or in a

railway, whether directly or indirectly, through a sub-contractor.
 The CG is responsible for enforcement of the Act in railways, mines, oilfields and air
transport services, while the SG are responsible for it in factories and other industrial
establishments.
In order to bring the law in uniformity with other labour laws and to make it more
effective and practicable, the payment of wages Act was last amended in 2005 which
consist of:-
 Enhancement of the wage ceiling per Month with a view to covering more employed persons and
 substitute the expressions “the CG” or “a SG” by the expression “appropriate Govt.”.
 also strengthening compensation and penal provisions by enhancing the quantum of penalties.
With effect from 11.09.2012 the employees drawing wages upto `18,000
per month is covered under this Act.
OBJECT AND SCOPE OF THE ACT

The main object of the Act is to eliminate all malpractices by laying down the time and
mode of payment of wages as well as securing that the workers are paid their wages at regular
intervals, without any unauthorized deductions. The Act extends to whole of India.

Factory [Section 2(ic)]

Means a factory which is defined under section 2 of the Factories Act 1948 and includes any
place to which the provisions of the act has been applied under Sub section (1) of section
85 thereof.
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Industrial or other establishment {Section 2(ii)}
(a) Tramway service or motor transport service engaged in carrying passengers or goods or
both by road for hire or reward;
(b) air transport service other than such service belonging to or exclusively employed in the
military naval or air forces of the Union or the Civil Aviation Development of the
Government of India;
(c) Dock wharf or jetty;
(d) Inland vessel mechanically propelled;
(e) Mine quarry or oil-field;
(f) Plantation;
(g) Establishment in which any work relating to the construction development or maintenance
of roads, buildings, bridges or canals or relating to operations connected with navigations
irrigation or to the supply of water or relating to the generation transmission and
distribution of electricity or any other form of power is being carried on;
(h) Any other establishment or class of establishments notified by the Appropriate Govt. in
Official Gazette.
Wages {Section 2(vi)}

Means means all remuneration (whether by way of salary allowances or otherwise)
expressed in terms of money or capable of being so expressed which would if the
terms of employment express or implied were fulfilled by payable to a person
employed in respect of his employment or of work done in such employment
includes a) Any remuneration payable under any award or settlement between the parties or order
of a court;
b) Any remuneration in respect of overtime work or holidays or any leave period;
c) Any additional remuneration payable under the term of employment;
d) Any sum which by reason of the termination of employment of the person employed is
payable;
e) Any sum to which the person employed is entitled under any scheme framed under any

law;
But does 1. Any bonus which does not form part of the remuneration payable under the term
of employment or which is not payable under any award or settlement between
not include the parties or order of a court;
2. The value of any HRA or the supply of light, water, medical attendance or other
amenity or of any service excluded from the computation of wages by a general or
special order of AG;
3. Any contribution paid by employer to any pension or provident fund & interest
accrued thereon;
4. Any travelling allowance or the value of any travelling concession;
5. Any sum paid to the employed person to defray special expenses entitled on him;
or
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6. Any gratuity payable on the termination of employment.
Responsibility for the payment of wages [sec.3]

 Every employer shall be responsible for the payment to person employed by him of all
wages required to be paid under the Act.
 In the case of a factory: person named as the manager of the factory;

 In the case industrial or other establishments: person responsible to the employer for
the supervision and control of the industrial or other establishments;
 in the case of persons employed in the work of contractor: a person in this behalf for
the local area concerned or a person designated by such contractor;
Point to be Remembered
 “employer” includes the legal representative of a deceased employer.
Fixation of wage & Time for Payment of wages [Sec.4 read with 5]
Fixation of Every person responsible for the payment o wages shall fix wage-periods in respect
wage period of which such wages shall be payable. No wage-period shall exceed one month.
[sec.4]
Time of  The wages of every person employed upon or in any railway factory or
payment of industrial or other establishment upon or in which less than 1000 persons are
employed, shall be paid before the expiry of the seventh day.
wages [sec.5]
 The wages of every person employed upon or in any other railway factory or
industrial or other establishment shall be paid before the expiry of the tenth
day,
 AFTER THE LAST DAY OF THE WAGE-PERIOD in respect of which the

wages are payable.
 However, in case of persons employed on a dock wharf or jetty or in a mine

the balance of wages found due on completion of the final tonnage account of
the ship or wagons loaded or unloaded as the case may be shall be paid before
the expiry of the seventh day from the day of such completion.
Time of  Where the employment of any person is terminated by or on behalf of the

payment in case employer the wages earned by him shall be paid before the expiry of the
second working day from the day on which his employment is terminated.
of termination
of employment  However,
if the termination is due to the closure of the establishment otherwise
than a weekly or other recognized holiday, the wages earned by him shall be
paid before the expiry of the second day from the day on which his
employment is so terminated.
 All payment of wages shall be made on a working day. 7

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 According to section 6, all wages shall be paid in current coins or currency notes or in both.
However, the employer may, after obtaining the written authorization of the employed person,
pay him the wages either by cheque or by crediting the wages in his bank account.
Deduction from the wages of employee [sec.7]

Deductions are allowed from the wages of an employee due to the following-
i. Fines;
ii. Absence from duty;
iii. Damage to or loss of goods expressly entrusted to the employee;
iv. Housing accommodation and amenities provided by the employer;
v. Recovery of advances adjusted of over-payment of wages;
vi. Recovery of any loans made from any fund constituted for the welfare of labour
vii. Subscription to and for repayment of advances from provident fund;
viii. Income tax;
ix. Payments to co-operative societies approved by the SG or to scheme of insurance;
x. Deduction made with the written authorization of the employee for payment of any
premium on his life insurance policy or purchase of securities.
LIMIT OF DEDUCTIONS [SEC.7(3)]

Notwithstanding anything contained in this Act the total amount of deductions which may
be made in any wage-period from the wages of any employed person shall not exceed –
In cases where such deductions are wholly or partly made 75% of such wages
for payments to co-operative societies
In any other case 50% of such wages.

Where the total deductions authorized exceed 75% or as the case may be, 50% of the
wages the excess may be recovered in such manner as may be prescribed.
Provisions Relating to Fines [Sec.8]

 No fine shall be imposed until notice of the acts and omissions for which fine is imposed shall be
exhibited in the prescribed manner on the premises of employment.
 No fine shall be imposed until an opportunity of being heard is given to the employee.
 The total amount of fine so imposed for any one wage-period shall not exceed an amount equal to 3% of
the wages payable to the employee for such wage period.
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 No fine shall be imposed on any employed person who is under the age of fifteen years.
 No fine so imposed shall be recovered in installments or after the expiry of 90 days from the day on
which it was imposed.
 Every fine shall be deemed to have been imposed on the day of the Act or omission.
 It may be noted that when the persons employed upon or in any railway, factory or
industrial or other establishment are part only of a staff employed under the same
management all such realisations may be credited to a common fund maintained for the
staff as a whole provided that the fund shall be applied only to such purposes as are
approved by the prescribed authority.
Maintenance of registers and records [sec.13A]

 Every employer shall maintain such registers and records giving such particulars of
persons employed by him, the work performed by them, the wages paid to them, the
deduction made from their wages, the receipts given by them and such other
particulars in prescribed form.
 Every register and records required to be maintained shall be preserved for a period of
three years after the date of the last entry made therein.
Claims for deductions from wages or delay in payment of wages and

penalty [sec. 15]
Application Where any deduction has been made, in contravention of the Act, from the wages of
to an employed person or any payment has been delayed,
appropriate  such person himself or
Authority  any legal practitioner or
 any official of a registered trade union or

 any inspector under this act or
 any authorized other person acting
may apply to the authority as specified by the appropriate government.
Time for  The application shall be presented within 12 months from the date on which
making deduction was made or on which payment of wages was to be made.
application  The application may be entertained even after the expiry of said period if the
applicant satisfies the authority that he had prevented by sufficient cause for not
making the application within such period.
Direction of After the receipt of application, the authority shall hear the applicant and the
Authority employer or other person responsible for the payment of wages, and after give them
an opportunity of being heard, and, after such further enquiry, if any, as may be
necessary, may, without prejudice to any other penalty, direct
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 the refund to the employed person of the amount deducted together
1
with the payment of such compensation as the authority may think fit,
not exceeding ten times the amount deducted, or
 the payment of the delayed wages together with the compensation, as

authority think fit, not exceeding Rs.3000/- but not less than Rs.1500/-,
 if the amount deducted or delayed wages are paid before the disposal of the application, the authority
direct the payment of such compensation, as it may think fit, not exceeding Rs.2000/-.
 A claim under the Act shall be disposed of as far as practicable within a period of three months from the
date of registration of the claim by the authority.
 It may be noted that the period of three months may be extended if both parties to the dispute agree for
any bona fide reason to be recorded by the authority that the said period of three months may be
extended to such period as may be necessary to dispose of the application.
No compensation in case of delayed wages

No direction for the payment of compensation shall be made in the case of delayed wages
if the authority is satisfied that the delay was due to-
a) A bona fide error or bona fide dispute as to the amount payable to the employed person, or
b) The occurrence of an emergency, or the existence of exceptional circumstances, the person
responsible for the payment of wages was unable, in spite of exercising reasonable
diligence; or
c) The failure of the employed person to apply for or accept payment.
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PENSION FUND
REGULATORY AND
DEVELOPMENT
AUTHORITY ACT,
2013 CS. Rajeev choudhary [Amit Kumar Classes]
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INTRODUCTION
1. This Act may be called the Pension Fund Regulatory and Development Authority
Act, 2013.
2. It extends to the whole of India.
3. It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint:
Provided that different dates may be appointed for different provisions of

this Act and any reference in any such provision to the commencement of
this Act shall be construed as a reference to the coming into force of that
provision.
IMPORTANT DEFINITION [SECTION 2]

(a) “Authority” means the Pension Fund Regulatory and Development Authority
established under sub-section (1) of Section 3;
(b) “Central recordkeeping agency” means an agency registered under Section 27 to

perform the functions of recordkeeping, accounting, administration and customer
service for subscribers to schemes;
(d) “Document” shall include any matter written, expressed or described upon any
substance by means of letters, figures or marks, or by more than one of those means, in
printed or in electronic version, which is intended to be used, or which may be used, by
the Interim Pension Fund Regulatory and Development Authority, or Authority or an
intermediary or any other entity connected with the National Pension System, for the
purpose of recording that matter;
(e) “Individual pension account” means an account of a subscriber, executed by a

contract setting out the terms and conditions under the National Pension System;

(f) “intermediary” includes pension fund, central recordkeeping agency, National
Pension System Trust, pension fund adviser, retirement adviser, point of presence and
such other person or entity connected with collection, management, recordkeeping
and distribution of accumulations;
(h) “National Pension System” means the contributory pension system referred to in
Section 20 whereby contributions from a subscriber are collected and accumulated in
an individual pension account using a system of points of presence, a central record-
keeping agency and pension funds as may be specified by regulations;
(k) “Pension fund” means an intermediary which has been granted a certificate of
registration under sub-section (3) of Section 27 by the Authority as a pension fund for
receiving contributions, accumulating them and making payments to the subscriber in
the manner, as may be specified by regulations;
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(o) “Regulated assets” means the assets and properties, both tangible and intangible,
4
owned, leased or developed by and other rights belonging to, the central
recordkeeping agency;
NATIONAL PENSION SYSTEM

National Pension System [Section 20]
The contributory pension system notified by the Government of India in the Ministry of
Finance vide notification, dated the 22nd December, 2003, shall be deemed to be the
National Pension System with effect from the 1st day of January, 2004, and such National
Pension System may be amended from time to time by regulations.
Notwithstanding anything contained in the said notification, the National

Pension System shall, on the commencement of this Act, have the following
basic features, namely:—
(a) every subscriber shall have an individual pension account under the National
Pension System;
(b) withdrawals, not exceeding twenty-five per cent of the contribution made by the
subscriber, may be permitted from the individual pension account subject to the
conditions, such as purpose, frequency and limits, as may be specified by the
regulations;
(c) the functions of recordkeeping, accounting and switching of options by the

subscriber shall be effected by the central recordkeeping agency;
(d) there shall be a choice of multiple pension funds and multiple schemes:
Provided that—
(a) the subscriber shall have an (b) the subscriber, seeking minimum assured CS. Rajeev choudhary [Amit Kumar Classes]
option of investing up to hundred returns, shall have an option to invest his funds
per cent of his funds in Government in such schemes providing minimum assured
Securities; and returns as may be notified by the Authority;
(e) there shall be portability of individual pension accounts in case of change of

employment;
(f) collection and transmission of contributions and instructions shall be through

points of presence to the central recordkeeping agency;
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(g) there shall not be any implicit or explicit assurance of benefits except market-
based guarantee mechanism to be purchased by the subscriber;
(h) a subscriber shall not exit from the National Pension System except as may be
specified by the regulations; and
(i) at exit, the subscriber shall purchase an annuity from a life insurance company
in accordance with the regulations.
Central Recordkeeping Agency [Section 21]

(1) The Authority shall, by granting a certificate of registration under sub-section (3) of
Section 27, appoint a central recordkeeping agency:
Provided that the Authority may, in public interest, appoint more than one
central recordkeeping agency.
(2) The central recordkeeping agency shall be responsible for receiving instructions from
subscribers through the points of presence, transmitting such instructions to pension
funds, effecting switching instructions received from subscribers and discharging such
other duties and functions, as may be assigned to it under the certificate of registration or
as may be determined by regulations.
(3) All the assets and properties owned, leased or developed by the central record-keeping
agency, shall constitute regulated assets and upon expiry of certificate of registration or
earlier revocation thereof, the Authority shall be entitled to appropriate and take over the
regulated assets, either by itself or through an administrator or a person nominated by it
in this behalf:
Provided that the central recordkeeping agency shall be entitled to be

compensated the fair value, to be ascertained by the Authority, of such
regulated assets as may be determined by regulations:
Provided further that where the earlier revocation of the certificate of
registration is based on violation of the conditions in the certificate of
registration or the provisions of this Act or regulations, unless otherwise
determined by the Authority, the central recordkeeping agency shall not be
entitled to claim any compensation in respect of such regulated assets.
Pension funds [Section 23]

(1) The Authority may, by granting a certificate of registration under sub-section (3) of
Section 27, permit one or more persons to act as a pension fund for the purpose of
receiving contributions, accumulating them and making payments to the subscriber in
such manner as may be specified by regulations.
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(2) The number of pension funds shall be determined by regulations and the Authority may,
in public interest, vary the number of pension funds:
Provided that at least one of the pension funds shall be a Government

company.
(3) The pension fund shall function in accordance with the terms of its certificate of
registration and the regulations made under this Act.
(4) The pension fund shall manage the schemes in accordance with the regulations.
Certain restrictions on foreign companies or individual or association

of persons [Section 24]
The aggregate holding of equity shares by a foreign company either by itself or through its
subsidiary companies or its nominees or by an individual or by an association of persons,
whether registered or not under any law of a country outside India taken in aggregate in the
pension fund shall not exceed twenty-six per cent of the paid-up capital of such fund or
such percentage as may be approved for an Indian insurance company under the provisions
of the Insurance Act, 1938, whichever is higher.
Prohibition of investment of funds of subscribers outside India

[Section 25]
No pension fund shall, directly or indirectly invest outside India, the funds of subscribers.
Eligibility norms of the central recordkeeping agency, etc. [Section

26]

The central recordkeeping agency, points of presence and pension funds, shall satisfy the
eligibility norms as may be specified by the regulations, including minimum capital
requirement, past track record including the ability to provide guaranteed returns, costs and
fees, geographical reach, customer base, information technology capability, human
resources and such other matters.
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Section B

Main Objects of Factories Act, 1948

IMPORTANT DEFINITIONS CS. Rajeev choudhary [Amit Kumar Classes]

Competent person [Section 2(ca)]

 the qualifications and experience of the persons employed in such institution

Hazardous Process [Section 2(cb)]

 cause material impairment to the health of the persons engaged in or connected

The State Government may, by notification in the Official Gazette,

Manufacturing process [Section 2(k)]

• making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning,

 It cannot be restricted an activity which may result into manufacturing something or

 in any manufacturing process, or

‘Lal Mohammed V. Indian Railway Construction Co. Limited’ –1999 SC

Factory [Section 2(m)]

Occupier [Section 2(n)]

• section 6, 7, 7A, 7B, 11 or 12; • the workers employed directly by him,

Notice by occupier [Section – 7]

 the name and situation of the factory,

Duties of occupier [Section 7A]

Section 9 prescribes the powers of the Inspector as

Certified surgeons [Section 10]

The duties of certified surgeons are as follows-

• by reason of any change in the manufacturing process carried on or in the

• removal of • cleaning of the • providing • to ensure that • all doors, windows

Overcrowding [Section 16]

Drinking water [Section 18]

• sufficient latrine and urinal accommodation of prescribed types shall be provided

• Fencing of machinery; • Pits, sumps openings in floors etc.,;

CS. Rajeev choudhary [Amit Kumar Classes]

First aid appliances [Section 45]

CS. Rajeev choudhary [Amit Kumar Classes]

Canteens [Section 46]

Shelters, rest rooms and lunch rooms [Section 47]

Crèches [Section 48]

Welfare Officers [Section 49]

WORKING HOURS OF ADULTS

CS. Rajeev choudhary [Amit Kumar Classes]

Compensatory holidays [Section 53]

CS. Rajeev choudhary [Amit Kumar Classes]

The term „ordinary rate of wages‟ is defined as

 the basic wages plus such allowances,

Register of adult workers

• the name of each adult worker in the factory;

Employment of young persons

• a certificate of fitness granted is in the custody of the manager of the factory;

The certifying surgeon, after examination, may grant to such young

o a certificate of fitness to work in a factory as a child, if he is satisfied that the young

o a certificate of fitness to work in a factory as an adult, if he is satisfied that the young

Working hours for children [Section 71]

CS. Rajeev choudhary [Amit Kumar Classes]

Annual Leave with wages

Carry forward of leave

CS. Rajeev choudhary [Amit Kumar Classes]

Wages during leave period

 exclusive of any over time and bonus

CS. Rajeev choudhary [Amit Kumar Classes]

Penalty for obstructing Inspector

• willfully obstructs an Inspector in exercise of any power conferred on him; or

Penalty for contravention of the provisions relating to hazardous process